OYO ROOMS RAISES FUNDING OF 1 BILLION USD

Hotel chain Oyo Rooms has raised $800 million in fresh funds led by Softbank Vision Fund, making it the newest entrant in the India’s unicorn club. It has also received a commitment largely from the Japanese investor to further raise $200 million, the company said on Tuesday.

Existing investors Lightspeed Venture Partners, Sequoia and Greenoaks Capital participated in the existing round.

The company did not reveal the valuation of the current round. However, according to sources, Oyo could be now valued at about $3-$4 billion.

Mint reported in March that Oyo was in talks with Softbank to raise $800 million in order to increase its presence in the country as well as accelerate its international expansion.

Gurugram-based Oyo has expanded its presence to five countries in just 10-12 months. The company is now present in India, China, Malaysia, UK and Nepal.

“The company will direct a significant part of the funds from this round of financing, approximately $600 million, into strengthening its position in China, which is still in the early stages of growth….” the company said.

Oyo also plans to use the capital to scale its business in these markets, new geographies and invest further in technology and talent.

“We will continue to explore newer businesses while remaining focused on both organic and inorganic growth,” said Ritesh Agarwal, founder and chief executive at Oyo. “We will also deploy fresh capital to take our unique model that enables small hotel owners to create quality living spaces, global,” he added.

According to the company, Oyo India has over 125,000 rooms and about 87,000 rooms in China’s 171 cities.

“With a promise to deliver good quality accommodation at affordable prices, OYO has grown exponentially to become the largest hotel chain in South Asia, and is swiftly expanding to international markets. We are tremendously excited to be a part of OYO’s successful journey,” said Munish Varma, Partner, SoftBank.

Started in May 2013, Oyo says it is present in over 350 cities with over 10,000 asset partners spread across five countries including India, China, Malaysia, Nepal, and the UK. It has over 211,000 franchised and leased rooms as a part of the chain. It claims to host more than 125,000 stayed room nights every single day.

J.P. Morgan is acting as the financial advisor to Oyo for this fundraising.

In September 2017, Oyo had raised $250 million, mostly from SoftBank Vision Fund. Sunil Munjal-led Hero Enterprise had also invested in the round, along with Oyo’s previous shareholders Sequoia India, Lightspeed Venture Partners and Greenoaks Capital.

Oyo was one of the breakout start-ups from the funding boom of 2015, raising a surprise $100 million from SoftBank in August that year. But after an expansion spree, the firm, which began as a marketplace, struggled to keep pace as customers complained of poor service and many rooms remained unoccupied.

Over the past year, Oyo has seen a turnaround, driven by its effort to gain full control of the room inventory on its platform. Its occupancy rates and net promoter score (a measure of customer satisfaction), have both improved significantly over the past year, the people cited above said.

The launch of its Townhouse brand in January 2017 played a key part in improving Oyo’s image with customers. Townhouse properties are owned by Oyo and fully managed by the company’s staff—they work like any other branded budget hotel. Townhouse has helped Oyo improve customer service and address the problems of fake bookings and high cancellation rates that it faced under the marketplace model.

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