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With cash running out, Housing.com faces trouble

By Patanjali Pahwa
Last updated on: July 12, 2016 15:50 IST
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Currently, Housing.com makes Rs 1.2-1.5 crore a month, against a burn of Rs 10.05 crore.

Housing.com may be running out of time. There's cash left only for a few more months, according to multiple sources. But, Chief Executive Officer (CEO) Jason Kothari has not given up and is trying for another lifeline.

In an interaction with Business Standard last week, Kothari had admitted that the company was in the market for more money and had approached a few strategic investors.

“We are looking to raise capital in a few months...'' But, he added, “We are stable… and it isn't an urgent need.'

The developments in the past few months did not suggest things were stable though.

For instance, Housing.com shelved its rent category back in October even as it brought in a million listings and eight million hits.

Currently, the company gets less than four million unique hits.

The category cost the company less than Rs 2 crore, people in the know said. However, Kothari argued:

“There was a need to bring focus to the business model and we decided to do that with buy and sell.'

The focus was now to sell apartments on Housing.com and in January when its top investor SoftBank's $15 million poured in, the rentals business was shut.

“If you want to focus on one category, say, selling and want to shutdown rentals, then you have to be ready to start selling apartments from day one,' said a co-founder who is no longer with the company. That did not happen.

The company had decided, perhaps due to pressure from its biggest investor, to evolve into a transaction-led model from an ad-sales model. But, there were no transactions to do, Kothari admitted.

“The easiest transactions to do would have been rentals. But, that was shut down,'' said an executive.

Kothari explained: “No one in the world is using renting as a transactional model online and we would need to make innovations never made before.'

After October, there were more layoffs. Sources said the number was closer to 400. Kothari refused to confirm the number but said: “After executing a new business model in January, we got a sense of what is the right amount of resources needed.'

This, he said, led to another round of rationalisation.

After the ‘rationalisations', many from Housing were flown to China to study successful real estate companies.

The company also started hiring senior leaders across the board.

Among others, former 99acres business head Vineet Singh was brought in an advisory capacity. Former Amazon executive, Ashish Laghate, was inducted into the product team.

Kothari insists that Housing may make acquisitions instead to kickstart the sales model. The company is still looking for a suitable candidate.

Currently, according to three independent unrelated sources, Housing.com makes between Rs 1.2 crore and Rs 1.5 crore a month.

The monthly burn is $1.5 million (Rs 10.05 crore). The company raised $15 million (Rs 100.5 crore) in January with very little left from the previous round.

Even so, the company has set ambitious goals. It wants to make $10 million (Rs 67 crore) in this financial year and be profitable in 18 months.

Kothari said the company would not measure its revenue in gross merchandise value and that it is on its way to hit the mark. "Even our board thought it was ambitious, but we will get there."

Former employees said that when they meet over drinks, Housing usually comes up and they all shake their heads at the "fire sale" that may be around the corner.

Snapdeal's name has been bandied around the most. And, valuations have mostly come in the way. "If and when it happens, it will be an all-stock deal with one player taking a hit," said a former top executive.

Housing.com has, however, regularly rebuffed the Snapdeal takeover talks.

There were talks about a merger with SquareYards, too. Kothari denies it, though.

So does SquareYards, which maintains it is a profitable company and doesn't need to merge with anyone.

UNFOLDING OF EVENTS

  • 2012 Housing founded
  • Jul ‘15 Rahul Yadav asked to leave the company
  • Oct ‘15 Close to 700 people laid off
  • Nov '15 Jason Kothari appointed CEO
  • Jan ‘16 Housing raises $15 million from SoftBank
  • May ‘16 Another round of layoffs. Around 400 asked to leave
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Patanjali Pahwa in Mumbai
Source: source
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