IT raids, firing, and vendor disagreements - all that is brewing inside OYO

Sources within the company admit OYO is a can of worms waiting to be opened. The Softbank-backed unicorn is believed to be facing an IT raid and tough scrutiny from the authorities.
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All is not well with India’s third most valued startup - Oyo. The Gurugram-based startup is currently facing an IT-department raid, and is firing close to 5,000 employees, sources close to the matter within the company told YourStory

“The situation here is bad. The company has IT-department officials, and the CXOs are nowhere on the scene,” said a source inside the company.

However, an official statement by the company has refuted the claims and said that the IT-department is doing a routine check. 

Ritesh Agarwal, Founder and CEO, OYO

The spokesperson said, “There is a routine TDS survey in progress in one of our offices. We are cooperating with the authorities, and are committed to engaging with all relevant stakeholders. OYO Hotels & Homes has actively worked in ensuring that the wider unorganised segment is organised, and is part of the formal economy. We continue to support small asset owners by creating entrepreneurship opportunities, and giving them access to technology and other resources.” 

All isn’t well 

While official spokespersons of the company have assured that all is well inside OYO, several sources added that for the past several weeks now, the company has been facing multiple issues. 

“There are likely to be firings at the CXO level in the coming week. We believe that close to 5,000 people from mid- and senior-levels are going to be let go across all divisions. There seems to be little clarity at the moment. But the environment currently doesn’t seem healthy,” said another source on the condition of anonymity. 

Currently valued at $10 billion, OYO has moved to a lease and ‘Marriott’ like model, and has opened several verticals. OYO has expanded to over 800 cities in over 80 countries since it moved to a lease-and-brand model. The company claims to have hosted over 50 million guests so far.

Smoke and mirrors  

Recently, OYO was featured in a Harvard case study, and has been riding several other highs. “But after the WeWork debacle, investors now have started getting wary of models that are far from profitability. There is a strong push by the investors for profitability. And currently, OYO is far from it. So, investors have been pushing the company to cut its costs in every way possible,” said another source in the know-how. 

The issue isn’t just about profitability and firings, another highly placed source said, adding that the vendors have been dropping out of the platform, and aren’t too happy with OYO either. 

“The vendors are promised a business of Rs 1,000, and the rooms are sold at Rs 900, where the vendors get Rs 800. There is a clause in the contract that says OYO can give lower payment to the vendors in case the rooms aren’t sold. The vendors, therefore, are looking for a way out,” added the source. 

The company is yet to comment on the firings and the issue of vendors. 

(Edited by Suman Singh)


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