Oravel Stays, which operates hotel aggregator app Oyo, is set to report its first net profit in the second quarter of the current fiscal, according to an email sent by founder and CEO Ritesh Agarwal to the company’s top management on Tuesday.
Agarwal has said that the company is expected to book a profit after tax of over 16 crore during the July-September quarter.
The company, which has been preparing for an initial public offering, is expected to end the current fiscal with an adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 800 crore, nearly three times of the Rs 277 crore it had recorded in the previous fiscal.
In the email, seen by Fe, Agarwal has also noted that the company had clocked in revenue from operations of Rs 5,463 crore in FY23, 14% higher than the preceding financial year, while narrowing losses to Rs 1,286 crore. Oyo’s adjusted gross profit margin stood at 43% of revenue at the end of FY23 and its adjusted gross profit rose 23% year-on-year to Rs 2,347 crore.
Oyo has been focusing on operational efficiency and cost optimisation in recent years, which included headcount reduction and scaling down operations in several countries. The company shut down over 5,000 hotels in FY23 and scaled down its total number of hotels to 12,938.
“Our intent is to expand the hotel network again since the process of pruning the ones which were incompatible with our tech enabled, monthly revenue optimisation operating model,” Agarwal said in the email.
He added that the company sees “immense potential” in growth markets like the US and UK. Currently, Oyo has a presence in European countries, where it operates brands like “Belvilla by Oyo”. Last year, it had bought vacation rental firm ‘Direct Booker’ for $5.5 million, to add its 3,200 homes on Oyo’s platform.
Oyo still holds the largest footprint in terms of hotels in India and South-East Asia. Its overall gross booking value rose 25% to about Rs 10,000 crore in the last financial year, the email noted. Gross booking value from the hotel business alone stood at Rs 6,172 crore, marking a year-on-year growth of 35%.
In a report earlier this year, rating agency Fitch had said that it expects significant growth in Oyo’s Ebitda in FY24, led by an ongoing demand recovery in the travel industry, the company’s stable gross margins, and reduction in operating costs.
The broader hotel sector in India is riding on healthy business travel supported by strong economic activity as well as robust demand in MICE or meetings, incentives, conventions and events segment, said Anand Kulkarni, director, Crisil Ratings. “Key events such as the G20 presidency and ICC Men’s Cricket World Cup should also feed hotels demand this fiscal,” he noted.