Oravel Stays, the parent company of Oyo Hotels & Homes, reported a significant milestone: its first full year of profitability in the 2023-24 financial year with a profit of INR 799.6 crore (USD 12 million). This success follows eight consecutive quarters of positive EBITDA, totaling INR 2,100 crore. Oyo also maintained a cash balance of INR 1,000 crore and saw improvements in gross margins and operating costs. Founder Ritesh Agarwal is optimistic about future growth in India and international markets. Despite challenges like withdrawing its IPO papers, Oyo added over 5,000 hotels and 6,000 homes globally, reflecting a robust turnaround strategy.
Oravel Stays, the parent company of Oyo Hotels & Homes, has reached a significant milestone: its first full year of profitability. This comes after a period of rapid expansion and investment in the budget hotel and vacation rental market.
Oyo's founder and CEO, Ritesh Agarwal, announced a profit of INR 799.6 crore (around USD 12 million) for the 2023-24 financial year. This achievement follows eight consecutive quarters of positive earnings before interest, taxes, depreciation, and amortization (EBITDA), totaling INR 2,100 crore. The company also boasts a healthy cash balanceS of about INR 1,000 crore.
Looking ahead, Agarwal is optimistic about growth not just in India but also in key international markets like the Nordics (Denmark, Sweden, Norway, Finland, Iceland), Southeast Asia, the US, and the UK. He sees travel trends like premiumization (higher-quality budget hotels) and spiritual tourism driving demand for Oyo's offerings.
Oyo's path to profitability involved steady top-line growth and improved user confidence. The company's gross booking value (GBV) per hotel storefront per month saw a significant rise, reaching INR 83,32,000 (roughly USD 4,000). This translates to an average hotel booking value of around INR 4,000 per month. Additionally, gross margins improved to INR 2,508 crore (around USD 302 million) compared to the previous year, and operating costs decreased from 19% of GBV to 14%.
This improved financial performance was recognized by global rating agency Fitch. They upgraded Oravel Stays' long-term issuer default ratings, citing the company's sustained EBITDA growth (INR 2,100 crore) and recent USD 195 million debt buyback.
Despite this positive news, Oyo faces some hurdles. The company recently withdrew its draft IPO papers for the second time and is negotiating with investors for a fundraise at a potentially lower valuation. This reflects a broader trend in the tech industry where investors are prioritizing profitability before funding.
However, Oyo remains committed to growth. The company added over 5,000 hotels and 6,000 homes globally in FY24. They plan to refile their IPO papers after refinancing a USD 450 million loan.
Oyo's turnaround story demonstrates the challenges and potential of growth-focused startups. While profitability may take time, a focus on operational efficiency, user confidence, and cost reduction can pave the way for long-term success.
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