OYO rooms is an Indian hotel brand that owns and operates in the hospitality sector. It also aggregates standardised hotel rooms. It currently operates in more than 200 Indian towns, Malaysia and Nepal. It recently has closed a $250 million (about Rs 1,600 crore) round of funding led by SoftBank. Existing investors Sequoia India, Lightspeed Venture Partners, and Greenoaks Capital participated in the round. Hero Enterprise joined in as a new investor. It is being considered as the second major bet placed by the world’s largest pool of private capital in India over the course of the last two months. The deal makes OYO a key company in SoftBank’s portfolio which includes the likes of Paytm, Flipkart, Hike, Grofers, and InMobi.
The company has decided to enter into real- estate and invest in a chain of hotels. OYO said in a statement that it will use the fresh funding to strengthen its network in India. It also plans to expand in South East Asia (SEA) region. The series D investment gives OYO growth capital to scale up its system and invest in its recently launched effort to create finest, self-managed hotels under the Townhouse brand. OYO Townhouse is similar to the franchise model employed by chains like Treebo and Fab Hotels. “We will also deploy fresh capital to take our made-in-India business model to international markets which are characterised by a similar supply-demand imbalance in real estate and hospitality,” Ritesh added. They are developing capabilities to add 10,000 rooms to their network each month.
It also gives OYO an opportunity to chalk out the competition from large online travel agencies MakeMyTrip and Goibibo, which joined forces in October last year. It is competing with numerous other brands, which include Treebo, FabHotels, Paytm, Booking.co, Yatra, Airbnb- to name a few. A week ago, Treebo raised $34 Million (Rs 220 crore) in its Series C funding round led by Karst Peak Capital. In July, FabHotels secured Series B funding of $25 million from Goldman Sachs and Accel Partners. In June, Airbnb tied-up with Maharashtra Tourism Development Corporation (MTDC) to list MTDC home stays on its platform. So this is a big win for OYO.
SoftBank is betting big on the Indian startups once again. The investment also signals SoftBank’s continued support to OYO even after seeing massive write-offs in its investments in Housing.com and Snapdeal. “OYO has solidified its position in India as the leading accommodation brand for consumer affordability and high quality standards. We’re excited to continue to support OYO as they further expand their position in India and bring the OYO promise of affordability and elevated hospitality to other markets,” said Justin Wilson, SoftBank’s nominee on OYO’s board of directors.
While company spokespersons did not disclose the exact terms of the latest round of equity financing, the transaction is believed to value the Gurgaon-headquartered company at $850 million-$900 million, a significant upside to its last reported valuation of $460 million in August 2016.OYO hence has gained a great deal and its idea for expansion is hoped to be successful in this domain of competitive hospitality sector.