In The Red: Oyo global losses rise to $335 million due to costly China expansion

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Published: February 18, 2020 6:15:55 AM

The firm said it has over 43,000 asset partners and claims to have hosted over 180 million guests from more than 120 nationalities between January-December 2019.

Revenues stood at about $211 million in FY18, the company said.Revenues stood at about $211 million in FY18, the company said.

Oyo Hotels & Homes on Monday said its consolidated losses increased to $335 million in the year to March 2019 from $52 million in FY18 as expansion into international markets, including key market China, entailed heavy costs. Consolidated revenues grew nearly five times y-o-y to $951 million in FY19. Revenues stood at about $211 million in FY18, the company said.

The Gurgaon-based firm, however, said it narrowed its net losses in India from 24% of revenue in FY18 to 14% of revenue to $83 million in FY19. India contributed $604 million in revenues, registering an almost three-fold rise on a yearly basis; revenues from China stood at $307 million with the remainder ($41 million) coming from rest of the markets.

On the earnings call on Monday, Rohit Kapoor, CEO at Oyo India and South Asia, said as far as India businesses are concerned, there is no “deadline” for any business to come to the path of Ebitda profitability —what is required is to have a clear path to profitability. “We have the runway to keep doing our businesses with a logical outcome,” Kapoor added. Aditya Ghosh, member, board of directors, said while among international markets, China remains a priority, the firm is also seeing a lot more traction in markets like US, UK and Japan. Last year, Oyo said it will invest $300 million in growing its US business.

Oyo’s valuation report filed with the RoC in November 2019 had shown its losses ballooned more than 6.6 times to Rs 2,385 crore ($334.12 million) in FY19. The company’s revenue from operations, although, increased about 4.5 times to Rs 6,457 crore ($904.59 million), according to the report. The audited results released on Monday are in line with the valuation report which the firm claimed to be provisional.

Since it was set up in 2013, Oyo has been on an expansion spree, widening its footprint to 80 countries. The firm said it has over 43,000 asset partners and claims to have hosted over 180 million guests from more than 120 nationalities between January-December 2019.

Start-ups, however, have come under investor scrutiny post the WeWork debacle. Major global investors including SoftBank are understood to be tweaking their investment strategy and portfolio companies have been asked to chase profitability rather than valuations. Indian internet companies like Oyo and Paytm have let go of employees as they look to rein in costs and check redundancy.

In a recent interview to a local paper, Kapoor said “…growing at the pace that we did over the last three years, we did sometimes go ahead of ourselves.” Kapoor said the firm has let go of about 15%-20% of its workforce, terming it as a “one-time exercise”. Before this downsizing, total number of employees stood at about 12,000 across businesses. Separately, officials said the company is yet to assess the impact of Coronavirus on its China business. Ghosh said that it would, nonetheless, lead to some short-term impact.

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