SoftBank bets on its dark horse, Oyo

Online hotel aggregation and management entity Oyo has raised $250 million (~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 mn, say sector experts. The company did not disclose the terms of equity financing in the latest round.

SoftBank Group has a $100-billion SoftBank Vision Fund. From which it has invested around $2.5 bn (~15,600 crore) in Bengalurubased online marketplace Flipkart.

Oyo, launched in 2013 and led by 23-year- old founder and chief executive Ritesh Agarwal, has till now raised $436 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, such as in Housing.com, or the investment 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 firm has managed to solidify its position as a leading accommodation brand for consumer affordability and with high-quality standards.

Hero Enterprise 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 and reduced its cash burn rate threefold 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.