Don’t be Quikr

This information is dated by a couple of months. It is important, though. In August this year, Quikr, the digital classifieds company said that its real estate vertical had performed exceedingly well. So much so that the business has become profitable. Quikr’s revenue for the year March 2018 is expected to be around Rs 170 crore ($23 million). As far as claims go, this was Quikr’s the world is our oyster moment.

What was the revenue?

Context: Just last year, ending March 2017, Quikr had total revenue of Rs 109 crore ($15 million). Total. Not just the real estate business. Long-term readers of The Ken will know Quikr as a mish-mash of five different businesses, but that’s all it managed. And now, just a year later, the company claims that things couldn’t be better. Just one vertical has brought in Rs 170 crore ($23 million). Which brings us into the picture.

The facts of the case are as follows. In the year 2016, Quikr, a digital classifieds company, acquired Commonfloor, a real estate property listing website. For $200 million, in an all-stock deal. In 2015, just a few months before the Commonfloor acquisition, Quikr acquired Indian Realty Exchange (IRX), an app-based aggregator of property agents. For an undisclosed sum.

That same year, Quikr also acquired RealtyCompass, another real estate listings company, which at the time claimed that it was a real estate analytics company. Except that the analytics part doesn’t deserve any serious exploration. Again, this acquisition was for an undisclosed sum.

Acquisition of the Commonfloor

Moving forward to 2016, post-Quikr’s acquisition of Commonfloor, and its appetite still wasn’t sated. Next on Quikr’s shopping list was Grabhouse, a real estate website for rental listings. Once again, an all-stock deal. Rumored to be worth around $10 million. Then in 2017, Quikr acquired HDFC RED (through its acquisition of HDFC Developers) and HDFC Realty, an online real estate classifieds business and a real estate brokerage business respectively. For $54.8 million in total. Again, an all-stock deal.

To lord over all of these acquisitions, Quikr created a business unit called Quikr Homes.

To a casual observer, all of the above may seem like parts of a serious plan to dominate the online real estate business in India. A country where buying, selling, renting, brokers, buyers, and sellers of apartments and homes and pads, are all a string of problems in a business that survives on opacity and distrust.

Indeed, it should have been. But it hasn’t panned out that way.

In the last three years, in a mix of stock and cash, Quikr has invested anywhere between $300-$350 million in the real estate business. Now, the company hasn’t filed its March 2018 financials, but just last month, Quikr claimed that the real estate piece contributes to 35% of its total income.

It should come as no surprise to you, dear reader, that total income is a misleading indicator of the true health of a business. Operating income does a better job. For the year ending March 2017, Quikr had an operating income of Rs 64 crore ($8.6 million). Now, let’s say that the real estate vertical (minus the HDFC acquisitions) still accounted for 35% of Quikr’s business. That would be Rs 22 crore ($3 million).

Impact on the revenue

But here’s the thing. As of March 2015, before the acquisition by Quikr, Commonfloor already had a revenue of Rs 44 crore ($6 million). By March 2017, its revenue halved. In fact, more than halved. In two years. The inference is for you to draw.

When The Ken presented these numbers to Quikr to get to the bottom of the real estate vertical claim, the company said that it’d be better if the 35% claim is looked at as a percentage of total income and net operating income. To put it mildly, that would be both wrong and willful misdirection.

Sources The Ken spoke with said that the real estate business should contribute around Rs 60 crore ($8 million) to the operating income of Quikr in FY18. That’s less than $10 million. A pittance, really. And that’s without us even getting into the company’s losses.

Now seems like as good a time as any to ask, whatever happened?