Founder’s buyback lifts Oyo valuation to $10 bn

Agarwal to infuse $700 mn in the $1.5 bn round to nearly triple stake

BENGALURU: Oyo Hotels and Homes is raising $1.5 billion, in its largest fundraising to date, from its founder Ritesh Agarwal and Japan’s SoftBank.

The investments, part of Oyo’s Series F funding round, will be used to expand in the US, its fastest-growing market, and bolster its vacation rentals business in Europe. The fundraising is the largest for a unicorn in India since SoftBank invested $2.5 billion in Flipkart in 2017, according to Paper.vc.

Agarwal, Oyo’s 25-year-old founder, will infuse nearly $700 million into the company in this round.

The deal, which values the Gurugram-based firm at $10 billion, will increase Agarwal’s stake from nearly 10% to 26-29%, a person close to the development said, requesting anonymity. Existing investors including Greenoaks Capital and Airbnb will invest $800 million in Oyo.

Agarwal’s capital infusion is part of his plan to triple his stake in Oyo by investing $2 billion to buy back shares from some of the company’s early investors, including Lightspeed Venture Partners and Sequoia India.

Agarwal’s purchase is being made through RA Hospitality Holdings (Cayman).

Earlier this month, RA Hospitality received the Competition Commission of India’s approval to invest $2 billion in Oyo.

“I am also happy to share that on a year-on-year basis, we have seen that not only are we operating profitably at the building level but at the same time, our Ebitda (earnings before interest, tax, depreciation and amortization) has also improved by 50% (on a year-on-year basis). We truly believe that we will be able to build a truly global brand out of India, while ensuring that the business is run efficiently and with a clear path to profitability,” said Agarwal, who is also Oyo’s global chief executive officer.

Founded in 2013, Oyo is today India’s second-most valuable start-up with a valuation of about

EXISTING INVESTORS SOFTBANK’S VISION FUND, LIGHTSPEED AND SEQUOIA INDIA WILL CONTRIBUTE THE REST OF THE CURRENT ROUND

$10 billion, after Paytm.

Its portfolio comprises more than 35,000 hotels and 125,000 vacation homes, and more than 1.2 million rooms.

In September last year, OYO said it raised more than $1 billion from SoftBank, with participation from existing investors Lightspeed Venture Partners, Sequoia and Greenoaks Capital and supported by new strategic partners such as Airbnb.

So far, it has raised over $3 billion in investments.

The latest investment in Oyo comes at a time when its largest investor, SoftBank, is grappling with the failed initial public offering (IPO) of WeWork, one of its portfolio firms. The office leasing company withdrew its IPO filing on 30 September.

Another portfolio company, Uber saw a tepid trading debut on New York Stock Exchange. The ride-hailing company, which saw a private valuation of much as $76 billion before its public offering in May, has a market value of nearly $49 billion now.

Agarwal founded the startup in his teens after dropping out of college and roaming India on a shoestring budget. The wild, erratic standards at hotels and guest houses he encountered inspired him to start the online service, and the brand now aims to provide travellers a consistent experience. Oyo mainly signs on hotel owners and then helps them upgrade everything from bathroom fittings to furniture and bedding, and then provides them standardized supplies and support to train their staff.