India markets closed

OYO to raise $1.5 bn in Series F funding; money to be used for expansion in US, strengthening vacation rentals business in Europe

FP Staff

OYO Hotels and Homes is set to raise $1.5 billion (nearly Rs 10,650 crore), from its founder, Softbank and other investors as it gets ready to expand for expansion in the US and strengthening its vacation rentals business in Europe.

Softbank, has invested nearly $1 billion in OYO, through its Vision Fund and owns roughly 45 percent stake in it.

The latest round of funding will be a part of Series-F funding round.

OYO Hotels and Homes Founder and CEO (Global) Ritesh Agarwal, through RA Hospitality Holdings, will infuse approximately $700 million as primary capital in the company. The balance $800 million will be supplemented by other existing investors, the company said, according to a PTI report.

A significant part of the funds will be diverted towards continued growth in OYO's fastest-growing market - the United States, and in strengthening the company's position in the vacation rentals business in Europe, it added.

Agarwal said the company has continued support of its investors like Softbank Vision Fund, Lightspeed and Sequoia Capital to its commitment of "making #LivingTheGoodLife a reality for over 3.2 billion middle-income people around the world".

"With the Competition Commission of India (CCI) approval now in place, the company will get a capital infusion of approximately $1.5 billion for this mission, supported by me and other shareholders," he added.

On a year-on-year basis, OYO Hotels and Homes is operating profitably at the building level, and at the same time its earnings before interest, tax, depreciation and amortisation (EBITDA) has also improved by 50 per cent, Agarwal said.

"The growth across verticals in India and globally has been phenomenal and we believe that we will be able to build a truly global brand out of India, while ensuring that the business is run efficiently and with a clear path to profitability," he added.

Earlier this year, RA Hospitality Holdings had received CCI approval to invest $2 billion in OYO Hotels and Homes. In order to facilitate this transaction, Lightspeed Venture Partners and Sequoia, are selling part of their shareholding in the company to help the founder increase his stake while remaining invested and committed to the company's long-term mission.

OYO Hotels and Homes currently has more than 35,000 hotels and 125,000 vacation homes in its portfolio.

Hotel operators upset with OYO

As the Softbank-backed startup pushes toward profitability, an increasing number of Indian hotel operators who have partnered with it are complaining about being blindsided by fee increases.

The backlash against OYO€"while limited to a small share of the more than 10,000 hotel owners in India who work with it€"comes at a crucial time for an emerging-market unicorn valued at $10 billion and its major investor, a Reuters report said earlier.

OYO charges hotels a roughly 20 percent franchise fee on room revenues when hotels join its network, but some Indian hotel operators say the startup often ends up taking half or more of revenues through fees that were not initially disclosed.

A group representing hotel operators in Bengaluru called for a criminal probe into OYO last month, saying the company was withholding money because of unfair fee increases.

Agarwal said hotel operators who have raised complaints represent a tiny fraction of OYO's network and were seeking to drive prices higher at the expense of consumers.

"On an annual basis, OYO is able to retain 99 percent of its asset owners. If, for instance, people were unhappy, our retention rate would have been lower," he told Reuters.

(With agency inputs)

Also See: Hotel operators who partnered with Oyo call Softbank-backed startup 'biggest online fraud', demand criminal probe

Indian Hotels check out of Oyo app citing hidden charges levied by platform

Read more on Business by Firstpost.