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, 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.
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 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.
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.