Zolostays Co-founder Akhil Sikri exits; company chases premium segment

Akhil Sikri, Co-founder of ZoloStays, is stepping down from the company to embark on a new entrepreneurial venture. While the details of his next venture are not clear, as per company sources, Akhil was present at a recent meeting with the Zolo board, top management, and investors to discuss Initial Public Offering (IPO) plans.

Zolostays had been preparing for Akhil's replacement for over a year and a half before his departure, which came approximately four months ago. He started as the CTO of the company and later transitioned to lead HR and digital marketing teams. In his new role as a non-executive director, he will continue to provide advisory input to Zolo and its board, the company said in a statement.

Meanwhile, Nikhil Sikri, Akhil's brother and the company's CEO, will continue to head the Bengaluru-based co-living company. “Having your own brother by your side obviously makes it different because there was no question of running away when things got hard during COVID-19,” Nikhil told YourStory, as he reflected on his time with his brother at Zolostays.

Elevating experiences

At present, Zolostays is trying to reposition itself as a premium accommodation provider to boost revenue. Between 2021 and 2022, the company's operational revenue grew by less than 1% to Rs 44.8 crore. Zolo managed to narrow its losses by almost 25% to Rs 67.5 crore for FY22 from Rs 89.9 crore in the year-ago period by cutting down its expenses.

Meanwhile, the company has become more discerning while selecting assets, preferring only high-quality properties. Also, it is implementing design enhancements at its existing properties to reposition them as higher-tier units. According to Nikhil, this shift has “led to better pricing power” for Zolo, which expects to achieve profitability in the next two quarters.

“We've intentionally taken ourselves more on the premium side. Not to say that we don't want to serve any other customer. With time, we will serve them as well,” the CEO said, adding, “But every company has limited capital and energy at a particular finite cross-section of time.”

The slogan on Zolo’s landing page has transitioned from “Affordable PGs starting at just Rs 5000/month” in 2015 to its current avatar “Beautiful Living. Made Easy”. Its most expensive property in Bengaluru features car parking, a rooftop restaurant and a gym and has a few private rooms costing up to Rs 36,000 a month.

In fact, it recently opened a hotel, Z-Triloha, as an extension of one of its co-living properties. As per the company, the co-living space is meant for managerial-level and above-grade working professionals, while Zolo Belair hosts a diverse mix of residents, including associates managers and other affluent working professionals.

Residents between 26 and above mostly go for these properties, and the rent of private rooms at both Belair and Triloha can go up to Rs 37,000 a month.

“We've spent a lot of money and effort on rebranding our app and website. But without giving a great experience no matter how beautiful a website is, nobody cares,” he said, adding that these steps will help Zolo in boosting its income.

A recent survey by Housr, a co-living company, revealed that over 60% of respondents prioritise a fully managed space, which includes all necessary amenities as their top luxury. It also indicated that millennials place a high value on convenience and low-maintenance living, with accessibility being a significant factor in their housing preferences.

“We are seeing a shift in the way millennials approach housing. They are prioritising experiences over ownership and are willing to invest in luxury accommodation that offers convenience, style, and security," Deepak Anand, Co-founder CEO, Housr, said

Navigating with caution

Zolostays has set its sights on an IPO within the next 18 to 24 months, influencing its approach to risk-taking. 

The company has chosen to focus its efforts on familiar regions, particularly in south India, instead of looking for expansion in unfamiliar cities. Zolo has 12 properties in Bengaluru's Koramangala and six properties in New Delhi, where only one property has a bed priced above 10,000 per month. “It's by design, not by accident or constraint,” Nikhil said.

He claimed that the company's operations in Bengaluru, Pune, Chennai, and Hyderabad provided ample depth to meet Zolo's IPO objectives. “We plan to go public very soon, and to ensure that, we do things which are way more predictable,” he added.

One of Zolo's biggest competitors Stanza Living is planning to add 30,000 beds by 2023 end in Tier II cities like Dehradun, Vadodara, Indore, Coimbatore, etc., as per a Collier's study.

Zolo operates by leasing a property for several years at a rent higher than the local average yield, post which the property owner is no longer involved. The company then takes responsibility for furnishing the property and providing staff to manage it, including housekeeping services, and subsequently rents it to students and young professionals.

At present, Zolo cannot own properties owing to FDI rules that bar properties purchased with international capital from being sold within three years of purchase. Instead, its asset management arm builds or commissions properties suitable for a co-living arrangement, sells them to retail investors, and leases them back.

Nikhil said he aims to bring changes to this structure, which will let Zolostays take complete ownership of the properties it wants to own.

Going abroad

Zolo also plans to take its student housing and hotel business to Dubai, Indonesia, and Thailand by March 2024.

“The businesses we are planning to take global are businesses where we don't take underwriting risk,” he said, adding, “We understand tech, we understand processes, we understand positioning, we understand brand, we understand style, we understand organisation building, we understand the game.”

Zolostays recently signed a deal with Manipal Group, where the company will manage accommodation for 20,000 students studying at Manipal Academy Higher Education (MAHE) campuses in Bengaluru, Mangaluru, and Manipal.

(The copy has been updated to fix factual errors and include comments from Zolo)