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Bengaluru: Online classifieds firm Quikr India Pvt. Ltd, one of India’s most valuable start-ups, bought real estate portal CommonFloor in a distress sale orchestrated by Tiger Global Management Llc, the influential US-based hedge fund that is an investor in both.

Quikr, valued at an estimated $1 billion, and CommonFloor (maxHeap Technologies Pvt. Ltd) didn’t disclose the terms of the transaction, but two people familiar with the matter said Quickr paid $120 million in an all-stock deal. The people spoke on condition of anonymity.

CommonFloor was valued at more than $150 million when it last raised 60 crore from Google Capital in December 2014. The company raised a total of 321 crore from Tiger, Accel Partners and Google Capital since 2011.

Quikr and CommonFloor have valuations that seem disproportionate to their revenue.

Quikr reported sales of 24.78 crore for the year ended 31 March 2015 while CommonFloor generated sales of 45.76 crore for that year, according to documents with the Registrar of Companies.

Despite having generated revenue that is much larger than Quikr’s, CommonFloor attracted a much lower valuation because of the valuation metrics used by e-commerce investors that may seem peculiar to shareholders in traditional businesses.

Classifieds firms such as Quikr are given more generous valuations because of a large customer base that can potentially be monetized in future through advertising and the winner-takes-all nature of the business.

Quikr primarily has just one rival to contend with: Olx, which is backed by Naspers Ltd, a South African mass media company. Online real estate, on the other hand, is a crowded market with at least five well-funded companies, apart from upstarts that keep cropping up.

Apart from boosting Quikr’s sales, the CommonFloor deal will make it easier for the combined entity to raise money at a time investors have turned cautious on Indian start-ups after a boom that lasted until the middle of 2015.

Tiger Global, the most influential and prolific start-up investor, too, has cut down on fresh investments and is consolidating its existing holdings in India.

The CommonFloor sale was driven primarily by Tiger Global, which pushed the real estate portal to sell, several people familiar with the matter said on condition of anonymity.

“CommonFloor faced the heat after Tiger decided to pull back. The VC (venture capital) industry behaves in a way that if existing investor says no, it will be extremely difficult to raise more funds, especially if the existing investor is a well-funded one like Tiger. If an insider in a company stops supporting it, then potential new guys will become sceptical," an investor familiar with Tiger Global’s thinking said.

After ploughing money into more than 20 start-ups since May 2014, Tiger Global is refusing to lead new rounds of financing in many of its portfolio companies and is instead encouraging them to find new investors, cut losses or sell out.

In the past, too, the investment firm consolidated several of its investments. In 2014, Tiger along with Accel Partners spearheaded the merger of Flipkart Ltd and Myntra Designs Pvt. Ltd. In 2012, the two drove the merger of Flipkart and electronics e-tailer Letsbuy. The same year Myntra bought online apparel business Exclusively, in which the same investors held stakes.

Over the past six months, Quikr has been diversifying into new businesses to boost sales. The company is pushing into five new business segments—automobiles, real estate, jobs, services and customer-to-customer sales.

Quikr, which has raised about $346 million from Investment AB Kinnevik, Tiger Global, Steadview Capital Management, Matrix Partners India and others since 2008, has been particularly active in real estate.

Apart from launching its own offering, QuikrHomes, last year, it acquired Indian Realty Exchange (123 Startup Ventures Pvt. Ltd), a real estate agent aggregator, and RealtyCompass, a real estate analytics start-up.

The company also made a strategic investment in A.N. Virtual World Tech Ltd, a company which provides 360-degree street views.

CommonFloor will continue to exist as a separate brand. The companies said the combined entity will have the largest real estate inventory in the country.

“As we started innovating specifically for the category, we realized that innovations we were looking to make dovetailed very well with what CommonFloor has been doing," said Pranay Chulet, founder and chief executive officer of Quikr. “CommonFloor has got very strong developer relationships. Quikr has more consumer traffic."

Quikr is betting that its user base of more than 30 million will help the company buck the trend in the online real estate business.

Real estate start-ups are bearing the brunt of a broader downturn in demand, their travails compounded by limitations of their business models and the slowdown in funding for Internet businesses.

Housing.com (Locon Solutions Pvt. Ltd) is in talks to sell to online marketplace Snapdeal (Jasper Infotech Pvt. Ltd), people familiar with the matter said. The Economic Times newspaper reported this on 30 December.

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