After a nasty public battle with Sequoia India in an email and Quora, an online public forum, over alleged attempts to poach one of its employees, Rahul Yadav, who has become a recent lightning rod as Housing.com CEO, has taken on one of India’s largest media groups, the Times Group.
In an internal email sent on March 12 and reviewed by VCCircle, Yadav points to a lengthy story in The Economic Times, the business news flagship of Times Group. He then claims that MagicBricks, a real-estate broker site owned by Times Internet Ltd., a separate business of the parent of Times Group and a competitor to Housing, is raising funds “while malign” Housing.
The Economic Times story, citing investors—quoted anonymously-- said Yadav's time as Housing CEO may be short-lived and that a search was on for a replacement. The story also alleged that under Yadav, Housing was burning through its cash at a fast pace—about $8-10 million a month. The story extensively quoted Yadav who refuted those numbers.
In his internal email following the publication of The Economic Times story, the 26-year-old Yadav, well known in startup circles for his rather strong opinions about rival companies, wrote:
Date: Thu, Mar 12, 2015 at 5:19 AM
Subject: Investors considering to remove Housing.com co-founder Rahul Yadav as CEO: Economic Times
1. Investors called me and said Times is behind you, be ready for such story
2. MagicBricks (Our competitor and a Times Group Company) is trying to close funding round in US while malign Housing's position in India. Housing is being loved in US.
3. And they linked me with that unfortunate car accident. They have no shame!
4. After paying for past and upcoming marketing blasts' advances as well, We still have 75Mn+ in our bank.
Ola cabs raised $200Mn. We raised $90Mn. Almost at the same time. Their cash burn is 125Cr per month and ours <20Cr that too with recent ramp up. Where is the high cash burn?
5. Overseas expansion: We WISH to. We DREAM to. How come dreaming is leading to cash burn in international?
Please suggest what to do with this Times Group :)
Have a good day.
Satyan Gajwani, who heads Times Group company Times Internet Ltd, that runs MagicBricks, and Rahul Joshi, editorial director of The Economic Times, did not respond to separate emails seeking a response to Yadav’s email.
(Editor’s Note: In a lengthy email to our reporter, Amit Rai, director, legal, of Bennett, Coleman & Co. Ltd., the parent of The Economic Times and Times Internet, wrote that any and all claims about The Economic Times story made by Housing officials “are false” and ET stands by its reporting. He also pointed out that Times Internet Limited (TIL) which operates MagicBricks is a separate Company and “any suggestion that our news reports are connected to TIL’s alleged plans is completely untrue...”)
In his email, Yadav also refers to one error in The Economic Times story, which named him as being involved in a tragic incident few weeks ago where two people died in a late night single-car accident. Housing co-founder Advitiya Sharma was booked by Mumbai police for negligent driving. The case is pending. The newspaper did correct that original assertion, noting Yadav was not in the car at the time of the accident.
Yadav did not respond to a VCCircle email that asked him to elaborate on his internal email claims.
Meanwhile, at least one prominent Housing investor has pushed back on the notion that Yadav is likely to be replaced.
“There is no basis to these rumors. Rahul continues to lead the company as the CEO,” Ashish Gupta, senior managing director of Helion Venture Partners, wrote in an email response to VCCircle.
Separate emails sent to spokespersons of Nexus Venture Partners and SoftBank, the other major investors in Housing, did not elicit any response.
VCCircle has previously reviewed an information memo prepared by US-headquartered investment bank Moelis & Co. that shows that Times Internet, is seeking investors to potentially raise around $100 million, or Rs 620 crore, for a stake in MagicBricks.
The MagicBricks information memo claims it is the largest property listings company in India with around 40 per cent market-share in terms of number of visits, and the most number of active listings, some 600,000. It says around one-third of its active listings are actually verified.
An email query to Moelis media spokesperson, sent during the weekend, did not immediately elicit a response.
The digital real estate broker listings business in India has been using technology and other means to verify listings because some brokers can put up dozens of listings in an attempt to grab potential customers in a classic bait-and-switch approach. Real estate brokers in India are currently not regulated in any meaningful way nor are they required to meet any measurable standards. The Indian government has promised to address the issue though the required legislation has not been formally introduced for discussion in the Parliament.
Ironically, Yadav’s email about the Times Group comes just as the startup is spending significantly on advertising, including multiple full-page colour ads in newspapers owned by the Times Group, as it seeks to use its new investor money to create brand awareness.
That expensive campaign has also raised renewed questions about whether Housing is depleting its cash cushion without any significant revenue coming into the company. The Economic Times story, quoting regulatory filings, said Housing had reported Rs 1.9 crore in revenue for year ended March 31, 2014, while losses stood at Rs 48.8 crore.
India’s real-estate business has been in a major slump in the past year amid a glut of new homes, high interest rates and a ‘wait-and-watch’ approach by potential homebuyers. This coincides with a significant shift in homes’ shopping and buying behaviors among India’s urban consumers, who are increasingly turning to online businesses for their real estate search. The long-term demand for homes in India is pegged at around 5 million each year.
The long-term potential of India’s housing business has attracted significant capital in the past year.
Telecom and internet giant SoftBank recently led a $90 million funding round in Housing, along with New York-based hedge fund Falcon Edge Capital and existing investors.
SoftBank invested the capital through SoftBank Internet and Media, Inc (SIMI), a new unit created a few months ago with Nikesh Arora as its head. Arora, a former top executive at Google, was hired by SoftBank chief Masayoshi Son and has made some large bets on India.
Info Edge (India) Ltd, which owns 99acres.com, raised around $125 million through a qualified institutional placement. Another startup, PropTiger.com, which offers a full-service home buying model to consumers, raised some $36 million in a recent fund-raise that saw News Corp take a 25 per cent stake in the company with existing investors SAIF and Accel also add to their stakes.
Earlier this month, News Corp announced it plans to acquire Mosaic Media Ventures Pvt Ltd, the parent of this website.