The deal that includes cash and newly issued REA shares is expected to close in the current quarter.
REA currently holds a 13.5% shareholding in Elara, on completion the company is expected to have a shareholding of between 47.2% and 61.1%.
The total consideration of the transaction is expected to be in the range of US$50-70 million, with US$34.5 million payable out of existing cash reserves. REA has also agreed to subscribe for US$34.5 million of preference share in Elara to fund the repayment of 50% of Elara’s debt facility.
Following this transaction, News corp’s shareholding in Elara will increase from 22.1% to 38.9%.
“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.
We plan to make significant investments in Elara going forward,” said Owen Wilson, REA Group CEO.
Elara will continue to operate as a stand-alone entity within the REA group structure. Dhruv Agarwala, co-founder and CEO, along with the current leadership team, will continue to lead the company.
In January, Elara had raised $70 million from its existing investors NewsCorp and REA group.
“With access to capital and expertise from REA we will continue to launch new products,” said Agarwala.
REA group along with News Corp, already owns a significant minority stake in the company. The company has raised equity capital of USD 105 million to date from News Corp, REA Group, Elevation Capital, Softbank and Accel, among others.
A company executive said that this is an opportune time for the transaction given the massive acceleration in digital adoption in all categories over the last six months because of the COVID-19 pandemic.
The Indian real estate market is significant, with the current market size estimated at USD 180 billion and projected to grow at a CAGR of 19% over the next decade. The digital real estate classifieds advertising market is expected to grow at a CAGR of 29% until 2025, which provides the opportunity to build a big and profitable business.