Oyo Hotels & Homes is in talks for a fresh round of funding, which is likely to see the seven-year-old startup’s valuation hit the $10-billion mark. This will make it one of the most valuable new-economy ventures from the country, according to three sources familiar with the development. The Gurgaon-based company, founded by a teenaged Ritesh Agarwal (now 25) in 2012, is in talks to raise about $1 billion in fresh capital, for which it is in discussions with both new investors and existing backers like SoftBank. This is as per a report in the Economic Times.
“They are looking at a valuation of around $10 billion for the new round, for which they will hit the road next quarter,” said one of the sources mentioned earlier. “The company is looking at a new lead investor and there is high interest from both financial and strategic investors.”
SoftBank, which has led the last four funding rounds for Oyo since 2015, holds a little over 46% stake in the company right now after investing $1 billion. The expected bump in the valuation and fund-raise comes at a time when Oyo has aggressively expanded into global markets, especially in China and Europe, making it the sixth largest hotel chain in the world. A majority of the revenues for the company also come outside India, as it has also expanded to Southeast Asia and Japan.
“This is speculation. Oyo Hotels & Homes has a very healthy balance sheet and we are not in talks with any investors. We don’t have any further comments,” the report has quoted a spokesperson of the company.
If the deal goes through, it will make Oyo the most valued startup along with Paytm, which was valued at $10 billion when it raised $300 million from Warren Buffett’s Berkshire Hathway in August 2018. Paytm is also in talks for a fresh round of funding, as reported in business newspapers in the end of March, which would increase its valuation to $17-18 billion. Ride-hailing major Ola was recently valued at $6.2 billion, while education technology startup Byju’s is valued at $5.4 billion.
Oyo was valued at $5 billion when it raised about $800 million from SoftBank in September 2018. Around $600 million of this was earmarked for China and expansion into other global markets. Since then, the company has been able to line up several strategic investors — like ride-hailing companies, including China’s Didi Chuxing and Southeast Asia’s Grab, who pumped in $100 million each.
The biggest win for Oyo came earlier this year when San Francisco-based home-sharing major Airbnb, which was one of the inspirations for Agarwal when he started out, invested $75 million in the company.
“I cannot think of any other Indian business, forget startups, which has ambitiously decided to have a proper commanding presence across the world. The company is possibly the first truly global Indian startup and Ritesh now is clear that they can be the biggest hospitality company in the world. This is just the start,” said Vinod Murali, managing partner at venture debt firm Alteria Capital.
The aggressive global expansion has started from China in late 2017 by Agarwal, who also took on a local name — Li Taixi — to respect the culture and assimilate easily.
Hailing from a Marwari business family in Cuttack, Agarwal — then 18 years old — had initially started out as a bread-and-breakfast company called Oravel in Delhi. He also won a fellowship of $100,000 from Peter Thiel, an early investor in Facebook, who had a programme encouraging students to drop out of college and launch startups.
In 2014, he decided to focus on the hotels space and renamed the brand as Oyo, which has emerged as the largest hospitality player in the country over the last few years, offering economy and premiums stays as well.
Last month, Oyo said that it has become the second-largest hotel group in China with 4,50,000 rooms across 10,000 properties after 18 months of launching operations under subsidiary Oyo Jiudian in the country. In India, the company has over 1,73,000 rooms.
The company is building a war chest for more acquisitions as it expands into additional international markets, according to sources. Last month, Oyo said it will acquire 100% stake in Amsterdam-based vacation rental company @Leisure Group in an all-cash deal for $415 million.
@Leisure achieved operational profitability of close to $27 million and revenues of $149 million for the year ending December 2018, according to a filing made by its largest shareholder, Germany’s Axel Springer. The deal, once closed, will add 1,15,000 more rooms under management for Oyo in Europe even as the company has been expanding its flagship Oyo Townhouse in the UK.
For the financial year ending March 2018, Oyo reported an increase of three times in revenues to $60 million and a loss of $52 million, according to filings with the Registrar of Companies. Oyo has estimated a revenue of $214 million (Rs 1,481 crore) and a loss of around $74 million (Rs 512 crore) for the year ended March 2019 for the India business.
Since last year, Oyo has also been expanding into new areas like co-working, with acquisition of Innov8 for Rs 200 crore and even shared accommodation under Oyo Living. The company has also started cloud kitchens, leveraging the infrastructure of hotels it manages to start delivering on food delivery applications like Zomato.