SoftBank bets on its dark horse OYO with additional $250 mn funding

Ritesh Agarwal, founder and CEO, Oyo Rooms

Online hotel aggregation and management entity OYO has raised $250 million (Rs 1,600 crore) in a Series-D round, led by SoftBank Group's Vision Fund, Sequoia India, Lightspeed Venture Partners and Greenoaks Capital, along with Hero Enterprise.

While still not a 'unicorn' (billion dollar firm), OYO's valuation has almost doubled from $460 million in August last year to $900 million, say sector experts. The company did not disclose the terms of equity financing in the latest round.

SoftBank Group, the Japanese multinational telecom and internet entity, has a $100-billion SoftBank Vision Fund. From which it has invested around $2.5 billion (Rs 15,600 crore) in Bengaluru- based online marketplace Flipkart.

OYO, launched in 2013 and led by 24-year-old founder and chief executive Ritesh Agarwal, has till now raised $442 mn. For now, it has enough cash to take on the likes of Airbnb, FabHotels and Trivago, among others.

"Our teams have developed industry-leading expertise, undertaking the world's fastest hotel transformations. We are developing capabilities to add 10,000 rooms to our network each month. Over 95 per cent of our demand comes through our own channels, with no commissions to pay, and the business has a solid growth outlook. The fresh capital infusion will support our organic expansion to newer markets in India and abroad," said Agarwal.

A chunk of the initial investments made by SoftBank Group founder and chief executive Masayoshi Son's firm have either been sold off, as in the case of, or the investment was written off, as in the case of Snapdeal, or have till now not received more funds, like Ola. OYO is the only company which has managed to constantly secure more funds from the Japanese major.

According to Justin Wilson, SoftBank's board representative on OYO, the company has managed to solidify its position as the leading accommodation brand for consumer affordability and with high-quality standards.

Hero Enterprise, also investing in a number of companies, is the latest investor in OYO. "As a business family, we have always set new paradigms; OYO's unique business model excites us. The differentiated thinking and ingenuity Ritesh and his team bring to this industry gives us confidence that OYO can scale, innovate and set new benchmarks in customer experience," said Sunil Kant Munjal, chairman.

The country's biggest branded hotel company, with 7,000 hotels (70,000 rooms) had managed to trim losses by a third to Rs 325 crore in FY17. Its annualised revenue is close to Rs 2,500 crore and the focus is on expanding revenue from OYO 2.0 hotels that include the TownHall and Flagship brands. It says over 95 per cent plus of the hotels on its platform do business through the OYO app and sales channel.

The company says it hopes to double revenue in the coming year after a threefold- reduction in its cash burn rate in the past year; this was 15 per cent in the April-June quarter. Annualised sale or gross booking value is $400 million.

The company plans global expansion, starting with Southeast Asia. It has launched operations in Malaysia and Nepal.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel