At a time when growth-stage investments for startups have been extremely scarce, Oyo has managed to raise around $61.8 million(Rs. 413 crore) for its budget hotel aggregation business from its existing investor — SoftBank. The new funding round for the company comes at a time when investors are taking a back-seat, specifically Softbank, which is busy selling stakes in businesses to clear of its own debt.
Interestingly, none of the existing investors — Greenoaks Capital, Sequoia Capital and Lightspeed Venture Partners — of the company, other than SoftBank, participated in the current round. A LiveMint report suggests that Oyo had been looking to raise around $100 million in this funding round, but of course couldn’t raise.
This fresh infusion of capital in Oyo, which was allocated on July 22nd, is the first Indian investment by SoftBank since Nikesh Arora’s stepping down. He stepped down as representative director, president and chief operating officer of SoftBank even after getting a clean chit in internal probe and assumed an advisory role.
Prior to this round, Oyo had raised a staggering $225 million in five funding rounds. However, considering the company’s cashflows and its not-so-good expansion plans, it has been known that the company was finding it difficult to get more money.
In April this year, it raised around $100 million from SoftBank, Greenoaks Capital, Lightspeed Venture Partners and Sequoia Capital. The same group of investors had pumped in $100 million in its Series B round in August 2015. In March 2015, it nabbed $25 million in Series A round and in May 2014, it had raised $650k in seed round.
Last month, Oyo signed an agreement with Travelport. As per the agreement, the company’s network of 6,000 properties will now be made available to travel agency users through Travelport’s travel commerce platform. A couple of months ago, Oyo introduced an online marketplace for hotels called Oyo Bazaar, to procure daily essentials to run their business smoothly.
With Oyo Bazaar, the company will source supplies to the hotels in bulk and at prices that are 20-25 per cent cheaper than market rates, while generating almost similar percentage of margins for themselves in the process.
In the last few months, Oyo has expanded its focus from its core of budget hotel aggregation. It is now also offering holiday packages encompassing transportation, other assisted services and local activities. It also recently started leasing properties under “Oyo Flagship”, which allows the company, complete control over day-to-day operations, resulting in improved customer experience.
Oyo claims to operate in more than 170 Indian cities. The company currently claims to have 68,300 rooms across 5,855 partner hotels in India. The infusion of fresh capital will help the company to achieve its aim to triple inventory by the end of 2016. But we’ll have to wait and see whether that translates into more bookings.
To strengthen its position in the hotel aggregator segment, Oyo acquired its rival Zo Rooms for an undisclosed amount. The acquisition happened at a time when Zo Rooms was struggling to raise new funding round.
In this space, the Ritesh Agarwal founded company is competing against the likes of Treebo Hotels, FabHotels and StayZilla. Treebo recently raised $17 million in a fresh funding round. A couple of months ago, FabHotels also secured $8 million funding in its Series A round.
