[The F word] Hotel chain OYO raises $1 B to strengthen its global footprint

Gurugram-based hotel chain OYO has raised $800 million in a round of funding led by SoftBank Investment Advisers (SBIA) through SoftBank Vision Fund, with participation from existing investors Lightspeed Venture Partners, Sequoia and Greenoaks Capital. The new unicorn also confirmed it has received an additional commitment of $200 million. This brings the total fundraise to $1 billion. J.P. Morgan is acting as the exclusive financial advisor to OYO on this fundraise.

The company will direct a significant part of the funds from this round of financing, approximately $600 million, into strengthening its position in China, which is still in the early stages of growth, while the rest will go into maintaining its leadership position in India and expansion into new markets.

In a statement released to the press, Ritesh Agarwal, Founder and CEO, OYO said that in a short span of time the company has already started expanding its presence to newer segments like Townhouse, Oyo Home and they recently started Palette Resorts. He said that the team will continue to explore newer businesses while remaining focussed on organic and inorganic growth.

Ritesh said,

"In the last 12 months, we have increased our international footprint to five countries - India, China, Malaysia, and Nepal, and more recently in the UK. With this additional funding, we plan to rapidly scale our business in these countries, while continuing to invest further in technology and talent. We will also deploy fresh capital to take our unique model that enables small hotel owners to create quality living spaces, global.”

Bejul Somaia, Managing Director, Lightspeed India Partners Advisors, said, “It's exciting to see OYO's success in scaling the India business while extending their pioneering asset-light, controlled-experience model to international markets. Budget travellers are consistently shortchanged by the lack of trust, quality, and consistency in this segment, and we believe that OYO will continue to disrupt the hospitality industry by building a trusted brand that delivers affordable, consistent and high-quality experiences.”

OYO India claims to have over 125,000 rooms and is witnessing three times growth in transactions year-on-year with net take rates over 20 percent. The unicorn claims to be achieving unit-level profitability, and benefiting from 90 percent demand coming from its direct channels, improving operating efficiencies while customer loyalty, with over 67 percent of the top line in India coming from repeat customers.

The team adds that OYO China has presence in 171 cities with over 87,000 rooms, in over ten months since its foray into the market.  

Munish Varma, Partner, SBIA, said, “With a promise to deliver good quality accommodation at affordable prices, OYO has grown exponentially to become the largest hotel chain in South Asia, and is swiftly expanding to international markets."

Globally, OYO chain of hotels is present in over 350 cities with over 10,000 asset partners spread across including India, China, Malaysia, Nepal, and the UK.

UK is OYO's fourth international expansion. This year it entered China, and late last year, the team had ventured into Malaysia and Nepal. OYO is now present in over 150 cities across China, India, Malaysia, and Nepal. It claims to have over 5,000 exclusive hotels under its Oyo Townhouse brand, which works in close proximity with its asset partners while exercising full control over the hotels for ensuring a quality experience for travellers. Its network includes major metros, regional business hubs, top leisure destinations, as well as pilgrimage towns.