Oyo, the prominent Indian hospitality startup, is in advanced talks to secure INR 1,000 crore (USD 120 million) in fresh funding from family offices and Malaysia's sovereign wealth fund, Khazanah Nasional. Facing a 72% valuation drop from its peak in 2021, now valued at USD 2.5 billion, Oyo targets investors disillusioned by recent market corrections. The startup highlights its fiscal turnaround with an anticipated first net profit of INR 100 crore in FY24 and forecasts robust growth, projecting USD 1.8 billion in gross booking value and USD 957 million in revenue for FY25. Oyo's strategic focus on core markets and cost efficiencies underpins its bid to regain market confidence amidst broader hospitality sector recovery.
Oyo, the Indian hospitality startup that rose to prominence with its budget hotel aggregation services, is in advanced talks to raise INR 1,000 crore (USD 120 million) in fresh funding. This move comes after Oyo withdrew its application for an initial public offering (IPO) earlier this year.
Oyo is targeting a new pool of investors: prominent family offices that manage the wealth of wealthy families. These include the offices of corporate leaders like Anand Jain (former Reliance executive) and the Juneja brothers (founders of Mankind Pharma). This trend reflects a growing role for family offices in funding Indian startups, particularly those seeking alternative routes after facing challenges in the public markets.
The proposed funding round values Oyo at USD 2.5 billion, a significant decrease from its 2021 peak valuation of USD 9 billion. This 72% drop reflects a correction in the overall startup valuation landscape, where many companies have seen their valuations decline in recent months. Oyo is also in the final stages of negotiations with Malaysia's sovereign wealth fund, Khazanah Nasional, for additional investment, potentially increasing the total raised in this round.
To attract investors, Oyo has been showcasing its financial turnaround. The company claims to have achieved its first annual net profit of INR 100 crore in FY24 and projects further growth in FY25. Oyo expects its gross booking value, a key metric in the hospitality industry, to reach USD 1.8 billion and revenue to reach USD 957 million in FY25. These figures represent significant growth compared to FY24.
Oyo has streamlined its operations to focus on core markets like India, Europe, Malaysia, and Indonesia. The company has exited non-core markets like the US and China, where it faced challenges in establishing a foothold. Oyo has also reduced expenses significantly, particularly in employee benefits (down 82%) and marketing (down 60%). These cost-cutting measures have improved the company's financial health.
Oyo's financial performance and growth projections aim to attract investors who believe in the company's long-term potential. The company highlights its "higher-than-industry take rate," which refers to the commission it earns on each hotel booking, as a competitive advantage. Additionally, Oyo projects a strong gross order value compounded annual growth rate of 28% for FY25-FY29. While the exact terms of the potential IPO remain unclear, Oyo's efforts suggest a renewed push for a successful public listing in the future.
Oyo's fundraising strategy reflects a broader trend in the Indian startup ecosystem. Family offices are increasingly emerging as a source of funding for startups, particularly those seeking alternative routes to traditional venture capital or public markets. This shift highlights the growing importance of family offices in shaping the future of Indian startups.
Oyo isn't the only hospitality company seeking funding. Indian Hotels Company, which owns brands like Taj Hotels and Ginger Hotels, is reportedly considering raising money by selling a minority stake in its budget hotel brand, Ginger, to raise up to INR 250 crore. This suggests a need for fresh capital across the hospitality sector, which was hit hard by the pandemic but is now experiencing a recovery in travel demand.
Oyo's efforts to secure funding from family offices represent a significant development in the company's journey. The success of this fundraising round will be closely watched, with implications for both Oyo's future and the evolving landscape of startup funding in India.
Advertisement
Facebook
Whatsapp
