India’s largest mortgage lender HDFCBSE 0.19 % has sold its realty brokerage business HDFC Realty and its digital real estate business HDFC Developers which owns HDFC Red to online classifieds player Quikr.
The all-stock deal will see HDFC pick up around 3.5% stake in Quikr for the two businesses, according to sources, which have collectively been valued at about Rs 357 crore.
The deal will value Quikr at little over Rs 10,000 crore or about $1.6 billion, as compared to the $1 billion valuation it got when it last raised capital in 2015.
Quikr’s acquisition of HDFC Red and HDFC Realty is the second largest such deal, for the Bengaluru-based firm in the real estate vertical after it bought CommonFloor for about $120 million in 2015. With this, Quikr has completed 5 acquisitions for its real estate business – its biggest in terms of revenues which currently accounts for over 30% of sales.
The move is a significant step for Quikr towards deepening a transaction-based revenue model offering customers end-to-end real estate buying services from online to offline. The move is a part of its strategy towards hitting profitability by FY19. Quikr’s real estate rental business currently operates a transaction-based revenue model with an aim to expand beyond listings in the rest of the real estate business by the end of 2017.
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The deal will also form a commercial strategic partnership between the two companies, where Quikr will help HDFC increase the home loan business with user data on its platform while with HDFC Realty, which will be renamed Quikr Realty, an entry into the brokerage business will be made. HDFC’s brand name will also help Quikr attract customers and give its real estate business, which will account for 35-40% of the revenues, better understanding and leverage relationships with builders.
“It’s a win-win transaction for both the companies. In India, the real estate industry is going through a transition and large organised players like us can build a strong brand that consumers can trust in unorganised markets like brokerage,” said Quikr CEO Pranay Chulet.
The deal will further add HDFC Realty’s 7,000 strong nationwide broker network along with 7,000 project listings from HDFC Red to its platform.
HDFC will also take up a board seat in Quikr. Kotak Investment Banking was the exclusive financial advisor to HDFC for this transaction while Avendus Capital advised Quikr on the deal.
For HDFC whose primary business is home buying, the acquisition will give it access to more refined leads at a time when its broking business is losing steam. “We are increasingly seeing real estate sales happen in the online space, so it is a great online – offline partnership for us,” said Renu Karnad, MD, HDFC Ltd told ET. “We want to use data analytics on all Quikr platforms to get us housing loans.”
Quikr has raised about $346 million from Kinnevik AB, Tiger Global, Steadview Capital Management, Matrix Partners India and others since inception in 2008.
In FY16, Quikr had reported a 20% increase in net loss at Rs 534 crore and 66% increase in operating revenue at Rs 41 crore. Quikr has not yet filed its FY17 financials with the registrar of companies.
HDFC Developers which owns HDFC Red clocked Rs 6.23 crore in revenues while HDFC Realty posted revenues of Rs 35.25 crore as of FY17, the deal significantly adding to Quikr’s topline. Both companies however, cumulatively add Rs 28.4 crore in losses to Quikr’s bottomline but are now close to breaking even.
Source: Economic Times