OYO Hotels & Homes has formally announced its acquisition of co-working venture Innov8, while also stating that the SoftBank-backed hospitality chain was planning to expand the business to 50 centres by the end of the current calendar year.
The transaction, news of which was first broken by ET in January earlier this year, is believed to have valued Delhi-based Innov8 at about Rs 200 crore, and marks Gurgaon-headquartered OYO’s first step into the commercial real estate sector.
“Work spaces are a natural extension for us. The skill-sets, and capabilities are quite common. We have the people, talent, technology and a great customer base to leverage, who are accessing multiple services,” Rohit Kapoor, chief executive – new real estate business at OYO, told ET.
While Kapoor declined to comment on the terms of the deal, both, he and Ritesh Malik, founder of Innov8, confirmed that OYO will operate the latter as an independent brand, and alongside its existing co-working operations – Power Station and Work Flow.
As part of the acquisition, OYO will also onboard an estimated 150 Innov8 employees on to its rolls. Apart from OYO and Innov8, the still-nascent Indian co-working sector counts the likes of SoftBank-backed WeWork, Sequoia Capital-backed Awfis Space Solutions and 91springboard as the prominent players.
“Our attempt is to create a whole suite of products here, which make workspaces great, at price points that make complete sense. The attempt is to create a product portfolio not just for infrastructure but also to maximise yield. There are many opportunities between affordable to mid-market segment in the country,” Kapoor said.
Co-working companies have barely scratched the surface of the overall Indian office and commercial real estate market, which is estimated at about $30-$33 billion, according to industry reports.
While the acquisition will see OYO scaling faster with the existing inventory, Innov8 gets financial bandwidth to expand further in the growing co-working business in the country.
“Work spaces for us is infra-as-a-service, which has already extended from freelancers to large corporates. The trend is just increasing…For us, the affordable to mid-market (segment) is where 80% of India is,” Kapoor said.
According to a recent JLL report titled Co-Working – reshaping Indian workplaces, demand from corporates, startups and entrepreneurs has resulted in a huge jump in the co-working share in total office leasing.
The share has risen to 12% in the first quarter of 2019, up from the 8% level seen in 2018, it added 6.9 million square feet of cumulative space has been absorbed by co-working segment from 2017 to first quarter of 2019, it said.
OYO’s acquisition of Innov8 will also give the latter’s list of angel investors, which includes, former Google’s India head Rajan Anandan, Paytm founder Vijay Shekhar Sharma and Freshworks CEO Girish Mathrubootham, exits. The four-year-old company also counted famed Silicon Valley-based accelerator Y Combinator as an investor.
Launched in 2015, Innov8 offers co-working spaces and private offices for rent in Mumbai, Bengaluru, the National Capital Region, and Chandigarh.
“All the 150 plus employees will get absorbed in the new company. The acquisition will also open new doors for the Innov8 brand,” said Ritesh Malik founder of Innov8. Malik will now be responsible for the entire workspace strategy of coworking operation as well as expanding Innov8 brand.
Earlier this year, OYO said it would invest Rs 1,400 crore for its India and South Asia business, as part of its effort to double its expansion plan across business segments.
Globally, the Gurgaon-based firm operates over 18,000 franchised and leased hotels and over 515,000 rooms. In India, it operates over 8,700 leased and franchised hotels and over 173,000 rooms, with footprints in over 259 cities.