The REA Group has today announced that it is to increase its stake in the Indian property group Elara Technologies and in doing so gain a controlling stake in the company. Currently, REA has a 13.5% stake in Elara, but this is projected to increase to between 47.2% and 61.1% thanks to a deal worth between US$50 million and US$70 million funded by existing REA cash reserves and newly issued shares.
The deal will see REA and News Corp pay off Elara’s existing debt facility and in doing so take a controlling stake in shares as well as 5 of the 9 company board seats. In a second phase of the mooted deal, REA Group will offer to buy out all remaining shareholders apart from News Corp, thereby controlling a maximum of 61.1% with News Corp controlling the rest.
For its money, REA is getting a group of property portals which had a compound average growth of 42% between FY2017 and FY2020, although since March the bottom lines of all three portals operated have been impacted by Covid with FY21 figures likely to reflect this.
Assuming a completion date for the deal of 30th of November, REA Group’s results would consolidate those of Elara and would be expected to see a $15m - $20m revenue increase as a result.
As is the case with many property marketplaces around the world, Elara’s audience figures have been growing in recent months and there was considerable optimism expressed by REA Group’s CEO Owen Wilson about the potential of his company’s investment:
“India is an incredibly attractive market and one that provides excellent long-term growth opportunities, while complementing REA’s footprint in Asia and North America. The country is forecast to deliver strong growth over the next decade and continues to experience rapid digital transformation. With over 700 million internet users and roughly half a billion yet to come online, our increased investment in Elara will allow REA to be at the forefront of the considerable long-term opportunities within India, and the digitisation of the real estate sector.”
Australian interest in Elara goes back as far as 2014 when REA Group parent company News Corp bought a 25% stake in PropTiger. Since then through various investments, the latest being a US$70 million funding round in January, REA Group and News Corp have gradually increased their stake in the Indian portal company. As we heard from Elara COO Mani Rangarajan at the virtual edition of Property Portal Watch APAC last month, the Indian market is still somewhat fragmented with a great deal of untapped potential and economic growth.