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Oyo – plans to launch its own IPO, a look into Oyo’s past, present and what the future looks like?

Oyo Hotels & Homes started with a unique business model of budgeted hotels. An Indian hospitality chain that works on the model of leased and franchised hotels, homes, and living spaces, was founded in the year 2013 by Ritesh Agarwal.

It was initially launched as Oravel Stays in 2012 but was rechristened as Oyo in 2013.

It saw quick and huge popularity in the market as it offered budgeted but professional hospitality to its guests; individuals, families as well as business & professionals, widely accepted Oyo, as it was a much cheaper alternative to other hotels but at the same time offered all the essential services that are needed from a hotel.

The start-up as budgeted hotels soon expanded to other locations worldwide with thousands of hotels, vacation homes, and millions of singular rooms in India, Malaysia, UAE, Nepal, China, Brazil, UK, Philippines, Japan, Saudi Arabia, Srilanka, Indonesia, Vietnam and the United States and many other locations.

As per the latest, the founder of the company Ritesh Agarwal is eyeing to make the company ready for IPO. Agarwal also mentioned that his company has healthy cash reserves of close to $1billion for operations.

 

Oyo’s popularity and controversies

Oyo became a trend in Budgeted Travel both Tourism and Business and had a good run, soon after Ritesh Agarwal received a grant of $ 100,000 as part of the Theil Fellowship from Peter Thiel ( a German-American billionaire entrepreneur and venture capitalist, who is also the co-founder of Paypal, Palantir Technologies and Founders Fund).

However, it also saw fare shares of controversies and faced severe backlash both from its patrons and its competitors – 

  • Safety and Security of women patrons became huge debates when a series of rapes were reported by women while staying in Oyo Hotels.
  • Sharing customer data with the government, and what is described as ‘threat to privacy’ wherein in 2019, Oyo planned to implement a digital register mechanism to share customer data in real-time with the government.
  • Oyo has also been accused of using predatory pricing and breach of its agreements, 
  • Oyo has also been charged with threatening hotels to unilaterally change some of the clauses and, in case of non-complying, to stop payments.
  • In 2018, the company was accused of sending mass unsolicited job offers targeting senior and mid-level employees of its competitors.
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Oyo’s Funding Spree

  • In September 2018, Oyo raised $1 billion, of which the amount of $100 million was raised from Star Virtue Investments Ltd.
  • 2019, Oyo received $100 million from a Chinese company, DIDI CHUXING
  • October 2019 saw a series of fundings from SoftBank Group, Lightspeed Venture Partners, and Sequoia India to the tune of $1.5 billion
  • 2019, signed a $2 billion primary and secondary management investment round, supported by global institutional banks and his financial partners, subject to regulatory and shareholder approvals. Lightspeed Venture Partners, and Sequoia India, OYO’s early supporters, were to sell part of their holdings to help the founder increase his stake while remaining invested significantly in the company’s long-term mission.

Oyo’s present in times of Covid -19 Pandemic

Oyo saw a drop in its valuation in August this year, primarily due to the Covid -19 pandemic; with tourism and traveling at a halt, the company saw its valuation drop from $10 billion to $8 billion.

However, as compared to its competitors – Indian Hotels Co, Lemon Tree, and Chalet Hotels – the drop witnessed by Oyo is still less than its competitors, which saw a fare drop in valuation and a market-beating.

Having said that, the company is still the country’s third-biggest start-ups, after Paytm ($16 billion) and Byju’s ($10.5 billion after its latest round of funding).

As understandable, one of the sectors to have majorly impacted due to the Covid -19 pandemic is the Hospitality, Travel, and Tourism sector

The uncertainty in this sector still looms until the pandemic clears away. With both national and international travel curbed, likely, the industry will not see a rebound or any fundamental growth for several months to come.

Earlier in one of his statements, Agarwal had mentioned that he had estimated a drop of 15-20% in revenues and occupancy because of Covid-19. In reality, the revenues took a dip by over 50% – 60% globally in the month of March 2020.

 

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What does the future look like for Oyo?

Because new cases of Covid -19 are on the rise and are being reported globally, it is not difficult to point out that it could take considerable time and effort for Hospitality, Travel, and Tourism to bounce back from its current lows.

However, Agarwal has shared his plans for the future of the company – the CEO said that as per the current situation, the company has around $1 billion to fund its operations until an initial public offering (IPO) is announced. 

While he has given no mention of the timeline as to when the IPO will be floated, he did state that the time to go out for the IPO will ultimately be taken by the board and the company’s management.

The focus in the interim, according to Agarwal, would be to ensure that the management builds a company that is ready to go public.

 

In order to do so – various factors such as the market situation, opportunities both in India and outside will have to be taken into account. In the meantime, the company will continue to focus on its two core businesses – its hotels and holiday homes, as the company has seen, especially in Europe, that people are choosing smaller hotels and holiday homes.

In India, the company has seen roughly 30 percent month–on–month growth since August.

The company had to let go of thousands of its employees and had announced pay cuts in the month of April after the Covid -19 outbreak globally. But the management has also ensured that they are looking to restore all salaries by the end of December.

 

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