Oyo hotels and homes private limited, the parent company that owns and operates Indian budget hotel unicorn Oyo rooms, has filed its annual regulatory filings with the RoC. Amid those filings are company’s financial numbers, and those numbers are a mixed bag.
To start with positives, the company saw a staggering upsurge in revenues. In FY 19, Oyo saw its revenues reach $951 million globally, up from the $211 million that it reported at the end of March 31st, 2019 (for FY 18). The company saw such an increase as it expanded aggressively across the globe, with operations now in full flow in China and the US.
That aggressive expansion however, has also resulted in increasingly ballooning losses. The company reported net loss of $335 million, which is a staggering six times of the $52 million that the company reported for FY 18.
Most of this loss was due to company’s aggressive China expansion. As much as 75% of this figure was because of Oyo’s aggressive acquisition of partner hotels in the Chinese mainland, said the company in a statement. Overall gross margins fell from 10.7% to 7.1% in FY19 due to expansion in newer markets such as China.
All is not that bad though. While the company reported increased revenues and losses, its losses in the core India market decreased substantially. Oyo booked $604 million in revenue in FY19 (up 2.9X since FY18), reducing losses to 14% (from 24%) of revenue in FY19 to $83 million at the same time. This does signal that the company’s harsh measures on improving profitability are starting to show results. Gross Margins in India also increased from 10.6% in FY18 to 14.7% in FY19, which is significant considering the volumes at which Oyo operates.
More recently, Oyo has been in the news for employee layoffs, disagreements with hotel partners among other issues. The company recently announced layoffs in India, China and US offices, with the former two witnessing as many as 2000 employees being let off. Gupta spoke on the matters, saying “Growing at the pace at which OYO has in the past few years, we sometimes got ahead of ourselves and pressure-tested our organization at multiple levels. We see opportunities to improve in multiple areas like guest satisfaction, partner relations and sustainable economics, which includes right-sizing our workforce. ”
Talking about growth prospects in China and other international markets and the losses due to expansion, Oyo CFO Abhishek Gupta said, “Since China and other international markets were in development and investment mode, they contributed to USD 252 million (75%) of the USD 335 million losses for FY2019, while these markets constituted only 36.5% of the global revenues. We will continue to make growth investments in multiple new markets in the next fiscal year as well.”
Oyo has expanded aggressively in the year 2019 across international markets. The company acquired Leisure Group from Axel Springer in a massive $415 million deal to get into Europe’s vacation rental market. Oyo later spent over $300 million further on developing the same.
The company also entered Japan recently, in partnership with its largest investor and shareholder Softbank. The run however hasn’t been the best, with a Bloomberg report claiming that the company is at about 7,500 rooms in the country, much less than the 1 million target it had announced on launch.
