Oyo to enter food delivery space with Freshmenu stake

DISCUSSIONS WITH FRESHMENU COME JUST MONTHS AFTER OYO RAISED CLOSE TO $1 BN, BOOSTING ITS VALUATION TO $5 BN

BENGALURU: Oyo Rooms, India’s third-most valuable startup, is in advanced talks to buy a significant stake in cloud-kitchen startup Freshmenu, according to two people directly familiar with the matter.

If the negotiations are successful, Oyo will add the online food delivery business to its portfolio, complementing its budget hotels business.

Discussions with Freshmenu come just months after Oyo raised close to $1 billion, boosting the hotel chain’s valuation to nearly $5 billion.

“Oyo is building a food team, which will help Freshmenu expand to more cities under the brand name of Oyo,” said one of the two people cited above, requesting anonymity. “The idea could be more about adding the element of food to further build the hospitality business rather than getting into food delivery entirely.”

Mint could not immediately ascertain the value of the transaction.

An Oyo spokesperson said: “We do not comment on industry speculation and, therefore, cannot comment on this. As the largest hotel chain in India, operating franchised and lease assets, we do have an active play in the F&B business with over 25% of our revenue coming through the kitchens we operate in our hotels and, hence, culinary design and good food experience are valuable to us.”

Freshmenu did not respond to queries by Mint till press time.

Lightspeed Venture Partners, a common investor in Oyo and Freshmenu, played a key role in bringing the two to the discussion table, said the second person cited earlier.

The food-tech sector has become hypercompetitive as companies such as Swiggy, Zomato, Uber and Ola battle it out for leadership. This makes it difficult for smaller companies such as Freshmenu to compete with deep-pocketed incumbents, which offer deep discounts to win market share.

“At the end of the day, Freshmenu is just a brand selling on aggregators such as Swiggy and Zomato,” said one of the investors from the food-tech space, requesting anonymity. “They would just end up being one among the many brands on the platform—which makes it difficult to compete.”