OYO Rooms said on Tuesday it has raised $800 million in a funding round that was led by SoftBank Investment Advisers. In addition, it said it had a commitment of an additional $200 million that would take the total funding to an enviable $1 billion.
Interestingly, there was some discussion in industry circles to the effect the online hotel booking platform is now valued in the region of $3-4 billion. That is a quantum increase over the $850-million valuation that the company commanded just a year ago, in September 2017, when it raised $250 million.
Industry experts explained the leap in valuations, if at all there had been one, could have possibly resulted from SoftBank — an early investor in the start-up — picking up a big stake in the current round and paying some sort of a control premium. “SoftBank may have been willing to buy the stake at a premium because it is being given a big chunk of the equity,” explained an industry watcher. How big a stake SoftBank has bought is not immediately known but prior to this it held a stake of 28.6%.
Among the other investors who participated in the latest round of fund-raising include existing stakeholders Lightspeed Venture Partners, Sequoia Capital and Greenoaks Capital.
In the absence of financial results for 2017-18, industry experts said it would be hard to gauge the company’s performance.
In the year to March 2017, Oravel Travels, which operates franchise-based hotels under the OYO Rooms brand, posted a 33% decline in standalone losses to `330.9 crore according to filings with the registrar of companies and data platform Tofler. Revenues from operations increased fourfold to Rs 87.2 crore from Rs 17.5 core in FY16. Even as employee benefit costs, including salaries and wages paid by the firm, rose 60.9% to Rs 194.3 crore, total expenses fell by 16.7% to Rs 433.16 crore.
While OYO was backed by SoftBank early in its innings, the company ran into some rough weather following a period of rapid expansion of its marketplace during which the quality of the services suffered and the occupancy levels fell. The company, however, changed its strategy to improve its performance and the introduction of the Townhouse brand in early 2017 helped boost its ratings with customers. The properties under Townhouse are owned and managed by the company and operate like other hotels.
According to the company, OYO India has over 125,000 rooms and about 87,000 rooms in 171 cities in China. Started in May 2013, OYO says it is present in over 350 cities with over 10,000 asset partners spread across five countries including India, China, Malaysia, Nepal, and the UK. It has over 211,000 franchised and leased rooms as a part of the chain. It claims to host more than 125,000 stayed room nights every single day.