Singapore’s PropertyGuru CEO vows a comeback after IPO flop

Hari V Krishnan, CEO, PropertyGuru

In late October, PropertyGuru Ltd.’s board huddled with investment bankers from Credit Suisse Group AG, UBS Group AG and others to discuss the Singapore startup’s impending initial public offering.

Talks with potential investors had coincided with a slump in Australian tech stocks; people were starting to question its targeted valuation of A$1.36 billion ($932 million).

Dialed in from Sydney was PropertyGuru Chief Executive Officer Hari Krishnan. He recalled discussions around a key question: “Why are we doing this IPO in the first place?”

Expected proceeds of A$380 million were primarily to be used for pursuing growth, including acquisitions. A sale would also give existing shareholders in the real estate classifieds marketplace a chance to realize some value. The money wasn’t needed to fund ongoing operations.

Two days out from when PropertyGuru’s shares were due to start trading, the board unanimously agreed to pull the plug.

“We decided we don’t want to list unless we’re completely on the front foot and charging,” Krishnan, 41, said in his first interview since the company withdrew the IPO. “We’re not going to limp out into the world.”

PropertyGuru, 58% owned by TPG Capital LP and KKR & Co., could make another attempt to go public as soon as next year if market conditions are conducive, Krishnan said. But this time, more options will be considered, including a listing in Singapore or the U.S.

For Krishnan, who had been pushing hard for an orderly transition into a publicly listed company, the failed IPO was a rare setback.

“What’s hurting is your ego, not the fundamentals of the business,” he said. “We have a lot more clarity now. We will be validated over time.”

Anticipated Event

PropertyGuru’s IPO was one of the most-anticipated events in Singapore’s tech scene this year. The 12-year-old company, started by entrepreneurs Steve Melhuish and Jani Rautiainen the same year the iPhone was launched, has become a household name in the property-crazed city-state. Today, it’s the largest real estate marketplace in Southeast Asia with operations in five countries including Vietnam, Malaysia and Thailand.

But while PropertyGuru is the go-to site for home hunters in Southeast Asia, it’s little known in Australia. That contributed to the deal’s undoing, according to Lawrence Loh, an associate professor at the NUS Business School in Singapore.

“It’s a good company with proven track records in local markets, but it’s not yet in the league where international players follow them wherever they go, including off-the-beaten track like the Australian Stock Exchange in Sydney,” Loh said.

This year has also been an awful one for IPOs in Australia.

More than $1.5 billion of planned share sales have been withdrawn, the highest since 2008. Financial services firm Latitude Financial Group Ltd. scrapped what would have been the biggest IPO of 2019 just one week before PropertyGuru was due to list. Software company WiseTech Global Ltd. tumbled 24% between Oct. 15 and Oct. 21, while Afterpay Ltd.’s stock fell 22%.

PropertyGuru’s misadventure is part of a broader trend in the tech sector, where there’s been a disconnect between private valuations and public markets. Uber Technologies Inc., one of the world’s most-heralded startups, has dropped about 35% since its May IPO. WeWork had to pull its planned offering after investors balked at its lofty valuation, enormous losses and questionable governance.

Vietnam, Malaysia

PropertyGuru’s shares were marketed in an indicative range of A$3.70 to A$4.50. But the company is “at best fairly valued at the low-end of the IPO price range,” Arun George, an analyst at Global Equity Research, wrote on Smartkarma ahead of the planned sale.

Krishnan defends that valuation, noting PropertyGuru is generating free cash flow while revenue has grown at more than 25% a year on average since 2016. The company posted net cash flow from operating activities totaling S$7.1 million in 2018, compared with negative cash flow in 2017, the group’s 2018 financial statements show.

Revenue, meanwhile, is forecast to grow 44% to S$85.6 million this year, while net loss is expected to narrow to S$6.1 million from S$12.9 million in 2018, according to PropertyGuru’s prospectus.

In 2020, PropertyGuru plans to double down on its efforts in Vietnam and expand its mortgage financing services business in Malaysia and Singapore. Earlier this month, it hired former Samsung Electronics Co. executive Robert Vu as CEO of its Vietnamese unit, Batdongsan.com.vn.

Krishnan, who used to work at LinkedIn Corp., has been running PropertyGuru since 2016 when former CEO and co-founder Melhuish decided to take a step back to spend more time with family. Melhuish still serves as a board member and adviser.

One benefit of the grueling process of getting the company IPO-ready has been more transparency and improved corporate governance, Krishnan said. PropertyGuru may voluntarily disclose its financial statements in the future, he added.

“We are an unlisted public company now,” Krishnan said.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.