Oyo gets a USD 250 mn infusion from Softbank to fight MakeMyTrip, others

This is Softbank Vision Fund’s second big investment in India after a massive USD 2.5 billion round in Flipkart, last month.

Gurgaon based online hotel aggregation firm Oyo has raised a massive round of about USD 250 million led Softbank’s Vision Fund making it amply stashed with fresh cash to fight rivals MakeMyTrip, Yatra, ClearTrip, FabHotels and others.

Investment arm of automobile company Hero Enterprises and existing investors Sequoia India, Lightspeed Venture Partners and Greenoaks Capital also participated in the round.

The startup has so far raised about USD 442 million including this round.

Launched in 2013 by its 24-year old founder Ritesh Agarwal, OYO claims to be operating in more than 230 cities across India, Malaysia and Nepal.

It last raised around USD 62 million from existing investor Softbank in August 2016. Across India and Malaysia, Oyo claims to be operating over 70,000 rooms.

This is Softbank Vision Fund’s second big investment in India after a massive USD 2.5 billion round in Flipkart, last month.

“OYO has solidified its position in India as the leading accommodation brand for consumer affordability and high quality standards. We’re excited to continue to support OYO as they further expand their position in India…and other markets around the world,” Justin Wilson, SoftBank’s Board representative on OYO said.

Also read: Ibibo Group founder and MakeMyTrip President Ashish Kashyap resigns

“As a business family, we have always set new paradigms; so OYO’s unique business model excites us. The differentiated thinking and ingenuity that Ritesh and his team bring to this industry gives us confidence that OYO can scale, innovate and set new benchmarks,” said Sunil Kant Munjal, Chairman of Hero Enterprises.



Speaking on the development Ritesh Agarwal, CEO of Oyo said that the company will deploy fresh capital to take its made-in-India business model to international markets. “These markets are characterized by a similar supply-demand imbalance in real-estate and hospitality,” Agarwal said.

The budget hotel accommodation market has heated up with activity in the last couple of years.

The online travel agency space last year witnessed the merger of the two big firms, MakeMyTrip and GoIbibo.

Previously, the companies had also delisted Oyo from their platform citing conflict of interest. Earlier this month, another start-up in the budget hotel space, Treebo too delisted itself citing issues high commissions.

Oyo’s rival MakeMyTrip is trying to strengthen its own budget hotel segment and had launched ValuePlus in 2015. On the other hand, GoIbibo had also launched GoStays.

Also read: Man behind OYO Rooms : Ritesh Agarwal

In an interaction with Moneycontrol recently, MMT chief executive Rajesh Magow said that the company is targeting the hotels and packages segment to contribute at least 70-75 percent of its revenue in the next 3-4 years, expressing its aggressiveness on the accommodation market.

MMT currently gets 54 percent of the business from hotel and packages and 46 percent from flights.

Besides MakeMyTrip, Oyo has smaller rivals such as Treebo Hotels that raised USD 34 million in Series C round led by Hong Kong-based investment firms Ward Ferry Management and Karst Peak Capital, just last month.

Also read: Online hotel aggregator Treebo Hotels secures Series C funding





OYO Rooms grabs another $90mn from SoftBank to take on competition, strengthen new offering

Budget hotel aggregator OYO Rooms is closing a $90-million financing round. The funding is led by its largest shareholder, SoftBank.

Budget hotel aggregator OYO Rooms is closing a $90-million financing round, according to a report by Times of India. The funding is led by its largest shareholder, SoftBank. The report claims that OYO has already received $61 million, and the rest would be pumped in soon.

In a RoC (Registrar of Companies) filing by OYO in June, the company had claimed to be raising Rs 413 crore through a proposed rights issue of shares and was also looking to buy back shares worth Rs 60 crore from certain undisclosed investors. OYO declined to comment for this story.

The report suggests that the fresh capital is going to be used to strengthen OYO’s new offering – Flagship, which leases properties and services them for better experience. Flagship has over 70 operational properties currently.

Related Post: Man behind OYO Rooms : Ritesh Agarwal

It is believed that of the $90 million, the remaining $29 million will be a mix of debt and equity. The TOI report also suggests that OYO is picking up $5-million debt financing from InnoVen Capital. Apart from SoftBank, the other key investors of OYO are Sequoia Capital and Lightspeed Venture Capital.

This $90 million is SoftBank’s second round of investment in the company. OYO Rooms had raised $100 million from SoftBank last year. Mumbai-based VentureNursery, one of its first investors, which had held a two-percent stake in OYO, exited netting Rs 60 crore in a secondary sale of shares. The accelerator had put in Rs 25-30 lakh in the company during 2012-13.

This raising of funds is to take on the other players who are entering aggressively into the space, most importantly Treebo Hotels, which raised Rs 112 crore from a round led by Bertelsmann India Investments and existing investors. Also, after facing flak from customers on the service at OYO Rooms, Flagship is expected to redeem the company’s image.

OYO Rooms had shared a report in May that claimed that the company had reached unit-level profitability, meaning, on an average, OYO makes a profit on every room sold. As of May this year, the average booking rates of the rooms range from Rs 1,400 to 1,800. Ritesh Agarwal, Founder and CEO of OYO, says that their team has delivered a 15x year-on-year growth, with 2.3 million booked room-night transactions in the first quarter of 2016.

Related Post: Oyo Rooms turns profitable with 15x growth year over year

However, rumours of SoftBank looking to invest again in OYO had been making the rounds for several months now. There also were reports of a rift between VentureNursery and other investors at the end of last year, coinciding with the news of OYO buying Zo Rooms, its closest rival in an all-stock deal. Reports suggest that Zo went out of business and could not raise funds, and when Tiger Global, its investor pulled back from India, it left Zo with few options.

SoftBank, over the course of last year as well as 2016, has pumped more than $1 billion across its Indian bets – OYO, Snapdeal, Ola, Housing and Grofers. This funding in OYO comes at a time when higher rounds seem to be slowing down and bigger ticket sizes are no longer seen. Also, SoftBank seems to be taking it easy on the investment front, after the Housing debacle.

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