REA to buy controlling stake in Elara for up to $70M; News Corp to hike stake

Australia-based REA Group Ltd will hike its stake to take controlling interest in Elara Technologies, which owns three leading realty portals in India including Housing.com, in a cash and equity deal estimated up to $70 million.

US-based News Corp, which has a majority stake in online realty firm REA group, will also increase its stake in Elara Technologies to 38.9 percent from 22.1 percent by acquiring preference shares worth $34.5 million.

REA Group said in a statement that it has "entered into a binding agreement to increase its ownership interest in Elara Technologies Pte Ltd."

On completion of the deal, REA will hold five out of nine board seats and is expected to have a shareholding between 47.2 percent and 61.1 percent, it added.

"The total consideration for the transaction is expected to be in the range of $50 million-$70 million with $34.5 million payable out of existing cash reserves and the balance in newly-issued REA shares," REA said.

According to market sources, the deal has been entered at an enterprise value of over $160 million (around Rs 1,200 crore).

In a two-stage deal, REA will subscribe to preference shares of Elara worth $34.5 million and will acquire equity shares of three existing investors. This will result in an increase in REA stake from 13.5 percent to 47.2 percent.

REA did not name the three existing investors, but sources said they are Softbank, Accel and Saif.

In the second stage of the deal, REA will offer to buy another 13.9 percent shareholding from investors and others. If the offer is accepted, then its total stake in Elara will reach 61.1 percent.

Elara said in a separate statement that it will continue to operate as a stand-alone entity within the REA group structure. Dhruv Agarwala, Co-founder and CEO, will continue to lead the company.

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Elara Technologies, which was founded in 2013, have so far raised $105 million equity from various investors including News Corp, REA, Softbank and Accel. Elara had also raised $70 million debt.

Elaborating on the deal, REA said it has agreed to subscribe $34.5 million worth of preference shares in Elara. This fund will be used to repay 50 percent of Elara's debt facility. REA will buyout three Elara investors representing 11.7 percent stake.

After subscription of preference shares in Elara, and acquisition of the shares of the three shareholders, REA's stake will increase to 47.2 percent, it added.

REA will offer to acquire all remaining shares in Elara, except those held by News Corp, representing a combined shareholding of 13.9 percent, the statement said.

News Corp, too, agreed to subscribe $34.5 million worth of preference shares in Elara and the fund will be used to repay the remaining 50 percent of Elara's debt.

Commenting on the deal, REA Group CEO, Owen Wilson said: "India is an incredibly attractive market and one that provides excellent long-term growth opportunities, while complementing REA's footprint in Australia, Asia and North America."

The country is forecast to deliver strong growth over the next decade as it continues to experience rapid digital transformation, he said.

"We plan to make significant investments in Elara going forward," Wilson said, adding that this transaction creates an opportunity to leverage the combined talent and digital expertise of REA and Elara to become the market leader in India.

Agarwala said: "With access to capital and expertise from REA we will continue to launch new products in the market to enhance the consumer experience and make the process of home buying, selling and renting simpler, more digital and more transparent."

Elara offers a full range of residential property services across digital advertising and transactions.

Elara first started with PropTiger.com and later acquired Housing.com and Makaan.com to grow its business.

Its revenues grew at a CAGR of 42 percent over the last three years. The organic traffic on Housing.com increased at a CAGR of 56 percent during September 2017 and September 2020.