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Despite Grim Overall Earnings, SoftBank’s Indian Investments Boost Results, Oyo Achieves Profitable Unit Economics

In what could be a huge milestone for any startup, Oyo rooms backer Softbank, has claimed in its latest earnings report, that Oyo has reached a unit level profitability. What it means in english, is that the company is on an average making profit on every single room booked through it!

The report comes along with an earnings report from Softbank, according to which OYO, Snapdeal, Ola, and Hike — all of which are backed by the Japanese conglomerate — have posted significant growth.

The Softbank reporthas put down its Indian investments as performing quite well. While the report put Oyo as exhibiting 15 percent year over year growth along with reaching unit profitability, Ola saw a 55 percent improvement in its expected arrival time while also being firmly entrenched as the largest cabbie and consumer network in the country.

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Hike Messenger is apparently on the roll too. The report has shown it as the first Indian internet company to have crossed the 100 million users milestone with user engagement in access of 120 minutes a week. While 120 minutes a week may not sound that much, you have to consider that its the average and also takes into account people who don’t really use the app anymore along with the regular consumers. The service’s monthly message volume has also shown an increase of over 2 percent y-o-y.

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Snapdeal, one of Alibaba group’s most important investments in the country, is also doing well — or at least that’s what it seems like from the report. The company has reported an impressive 90 percent increase in its year over year Gross Merchandise value and has put down its wallet as the fastest growing, in the country. Impressive, particularly the GMV.

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Well, its great to know that the company’s inputs into India seem to yielding good outputs. However, the most important point in the report was Oyo — and that Oyo’s profitable unit economics (those are only three words Softbank has mentioned). Long touted as Softbank’s Indian airbnb and also criticized by many, the company seems to have finally achieved unit profitability and is making money on every room booked.

Speaking on the topic, Ritesh, who founded the company when he was just 19, told,

Our team delivered 15x YoY growth with 2.3 mn booked room-night transactions in Q1 Jan-Mar 2016 while our GMV continues to grow aggressively every month. 95% of our traffic comes from our own sales channels such as app, web and call-centre.

The cities driving profitability for us are those that have matured over the last year which include Gurgaon, Delhi, Hyderabad and Kolkata. We plan to grow deeper in all key business and leisure cities and triple our inventory by December 2016.

The company has certainly come a long way from it’s 200 hotel presence in 10 cities a year ago. Today, it has a partner base of 5855 hotels with a staggering total of 68,300 rooms in 170 cities in India. Apart from the team’s hard work, the exponential growth can also be put down to two massive fundraisers that saw it raise $25 million and $100 million respectively.

Speaking about finally reaching profitability, Ritesh said,

Profitability has come from innovating revenue-sharing models, a deep understanding of our markets and enabling new demand growth channels. These coupled with a strong data science driven approach help us dynamically control occupancy and room pricing.

He also recounted the benefits of Oyo’s extremely aggressive expansion of late, that has left it with a huge — and analyst termed ‘resource consuming’ — network across the country.

Far from being a hindrance, our large network and scale allow us to adopt a pricing portfolio approach and provide a wide inventory-choice for the guest. Our real-time demand prediction engine smartly balances revenue management versus an all-out discounting approach. This makes us the majority source of demand for our hotel partners and enables relationships that secure a superior experience for OYO’s guests.

Well, the strategy has certainly produced rich results for both Oyo and Softbank.  The company is pushing into other verticals as well and in January, it launched OYO Bazaar, a marketplace for hotel supplies in Delhi and Gurgaon.

Meanwhile, with a bevy of new players entering the market with veterans like MakeMyTrip raising funds to partner with hotels, there’s no relaxing for Oyo, at least at this point. However, as things stand now in the startup ecosystem in the country, the company seems to be on track and is doing about as well as can be asked of it.

Meanwhile, the report is one point to Softbank President Nikesh Arora, whose investment decisions — particularly for the company’s Indian commitments — had been questioned by a group of investors.

A bibliophile and a business enthusiast.

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