BENGALURU: Realty portal Housing has struck a partnership with rival PropTiger, in what is likely to be the first step towards a potential merger between the Mumbai and Gurgaon-based companies, according to three people directly aware of the development.
SoftBank-backed Housing will feature select new projects on its online platform and make use of PropTiger’s offline services to seal transactions with customers as part of this arrangement. “The commercial structure of the partnership is based on a revenue-share mechanism,” said Housing CEO Jason Kothari. He declined to comment on the possibility of a merger with PropTiger, or an investment from its main investor NewsCorp, which holds 30% stake in PropTiger. “PropTiger will provide an upfront marketing fee to promote new projects on the Housing platform, and will also share a part of the transaction fee on the successful sale of a property,” he said.
The arrangement is aimed at combining the online reach of Housing with PropTiger’s robust offline services which include services such as site-visits, help with paperwork and price negotiations as well as home loan offers. “This is just an experiment,” said Dhruv Agarwala, co-founder at PropTiger, adding that it will take another three months to figure out how this partnership pans out.
“Closures in real estate take longer,” he added. Agarwala also declined to comment on a potential merger. Meanwhile, Housing is also exploring talks with several other strategic and financial investors for a potential investment, one investor in the company said, adding that the board has not reached any resolution as of date. ET was not able to ascertain the contours of the deal being discussed.
Currently, SoftBank is the largest investor in Housing, while the 12 co-founders — alumni of IIT Bombay — also own stakes. The company was valued at Rs 1,500 crore in late 2014 when it raised $90 million led by SoftBank, but the valuation of internet companies in India has significantly softened since then. “What is likely to make the deal process more complicated is the liquidation preference and anti-dilution rights held by Soft-Bank and the stake of the 12 co-founders in the entity,” said one of the people quoted above.
“If the merger goes through both News Corp and SoftBank will invest in the new entity,” the person said. News Corp and SoftBank declined to comment. The partnership will be first launched in big cities such as Mumbai, NCR, Bengaluru, and Pune, covering approximately 20-25 new projects in the first phaseThe move is also in line with Housing’s strategy to build a complete buy-and-sell platform and shift from a mere real estate listings platform.
“Listing revenue in India is always going to be limited. Prop-Tiger has built the capability of actually executing transactions, that’s where the profit pools and scale lies,” said an investor with direct knowledge of the plans.
Currently, Housing generates all its revenues through a suite of online products but this partnership opens up new offline revenue channels with the transaction fee-sharing arrangement. Industry estimates peg the new home advertising market at about Rs 2,000-3,000 crore, with a quarter of it being spent online. Housing has raised more than $130 million in funding so far, out of which about $85 million has been invested by SoftBank.
Other major investors include Nexus Venture Partners and Helion Venture Partners. It also counts Falcon Edge Capital, Nirvana Venture, Russian billionaire Yuri Milner’s Apoletto Holdings besides Snapdeal cofounders Kunal Bahl and Rohit Bansal as shareholders. Earlier this year, SoftBank invested an additional Rs 100 crore in the portal to help it scale its home buying and selling a business with a focus on revenue generation.
This financing round came on the back of sustained turmoil in the company through much of 2015 including the ouster of its co-founder and then-chief executive Rahul Yadav.
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Source: Economic Times
