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Oyo to raise $1.5 bn from founder Ritesh Agarwal, existing investors
Photo Credit: VCCircle

OYO Hotels & Homes will raise $1.5 billion (about Rs 10,651 crore at current exchange rates) in a Series F funding round from existing investors and founder Ritesh Agarwal.

Agarwal, who is also the company’s CEO, will invest $700 million while existing investors will contribute the remaining, Oyo said in a statement. 

The company's existing investors include SoftBank Group Corp, Lightspeed Venture Partners and Sequoia Capital India.

The startup, which is operated by Oravel Stays Pvt. Ltd, will be valued at $10 billion following the round, multiple media reports said.

In another development, SoftBank and Oyo have jointly acquired an 80% stake in Japanese rental apartment operator MDI, Nikkei Asian Review reported on Monday.

The acquisition cost over $100 million, the report said, citing a person familiar with the deal.  It added that Oyo confirmed the transaction but declined to give any details.

The developments come even as the company faces backlash from some Indian hotel operators, according to a Reuters report earlier on Monday. The report said that some hotels had complained about being "blindsided" by fee increases by Oyo and had quit the platform.

In its statement, Oyo said it will use the funds from Agarwal and investors to continue its growth in the US and strengthen its existing position in the vacation rentals business in Europe.

Agarwal said in the statement the company was operating profitably at the building level on a year-on-year basis, and that its earnings before interest, tax, depreciation and amortisation had improved by 50% on a year-on-year basis.

"Our immediate goal, however, is to make forward-looking investments so we can achieve our mission, while delivering on our fiduciary responsibility to our investors by building a sustainable business,” Agarwal added.

Agarwal's investment in Oyo comes after he said in July that he would deploy $2 billion to boost his stake in the hospitality platform by subscribing to fresh shares and buying shares from some existing investors. As part of the plan, early investors Lightspeed and Sequoia would sell part of their stake in Oyo. 

Oyo operates more than 18,000 franchised and leased hotels in more than 500 cities across 10 countries including India, China, Malaysia, the UK, the UAE and Indonesia.

In recent months, the company has focused on expanding its business in the US and Europe.

In May, the company acquired a majority stake in European vacation rental company @Leisure Group from German media house Axel Springer SE. Last month, it bought Danamica, a Copenhagen-based data science firm which specialises in dynamic pricing. The company said that the move was in line with its global strategy to grow its vacation rentals business.

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