Microsoft invests $5m in OYO at $9bn valuation

India: SoftBank-backed hospitality chain OYO has received $5 million in investment from global tech corporation Microsoft, according to a regulatory filing, in the lead-up to the company’s proposed initial public offering [IPO]. 

The funding in the hotel aggregator was already rumoured last month, and it is believed that Microsoft currently values OYO at around $9 billion, following a fluctuation between $10 billion and $3 billion over the last two years.

According to some sources, the prospective transaction could involve OYO shifting to use Microsoft’s cloud services.

At the start of July, OYO founder and chief executive, Ritesh Agarwal, hinted that his company would consider going public via an IPO without offering a potential timeline.

Then, the startup secured a $660 million loan [Term Loan B] from institutional investors through the likes of JP Morgan and Deutsche Bank, claiming that the offer was oversubscribed by 1.7 times. OYO, in which Japanese conglomerate SoftBank retains a 46 per cent stake, added that it would use the funding injection to pay off past debts, strengthen its balance sheet and invest in product technology.

The budget hotel aggregator, which also operates a vacation rental brand – OYO Vacation Homes, has expanded aggressively across Southeast Asia in recent years, as well as into Europe and the United States.

However, the pandemic severely hampered OYO’s progress, leading it to lay off or furlough thousands of employees around the world [including at least 90 per cent of its US team] and restructure its business in Japan, after posting escalating losses in consecutive years. It has also been plagued by accusations of a “toxic work culture”, which Agarwal has strenuously denied.

Earlier this month, financial news website Moneycontrol reported that OYO had shortlisted three investment banks – JP Morgan, Kotak Mahindra Capital and Citi – for an initial share sale of more than $1.2 billion.

Meanwhile, Microsoft has already invested in a number of Southeast Asian startups, including news aggregator and short-video platform, DailyHunt, e-commerce marketplace Flipkart, and logistics SaaS platform FarEye.