OYO founder Ritesh Agarwal [Credit: Financial Express]

OYO Hotels & Homes to raise $1.5bn for global expansion

India: As part of plans to expand into the U.S. and European markets, lodging startup OYO Hotels & Homes is raising $1.5 billion in a Series F funding round through founder and CEO, Ritesh Agarwal, Softbank Group and other investors.

Agarwal, through RA Hospitality Holdings, is set to inject $700 million into buying new shares as part of a $2 billion plan that would triple his overall stake in the company to around 30 per cent. Japanese banks Mizuho Financial Group and Nomura Holdings are believed to be financing his acquisition of said shares.

Existing investors SoftBank’s Vision Fund, Lightspeed Venture Partners and Sequoia India are also investing in the funding round. They also participated in OYO’s previous $1 billion financing round in September 2018, which was supported by newly-announced strategic partner Airbnb.

A significant portion of the funds will be diverted towards continued growth in OYO’s fastest-growing market in the United States, and in strengthening the company’s position in the vacation rentals business in Europe.

It follows OYO’s acquisition of Danish data science firm Danamica last month for an undisclosed amount.

OYO, which launched in 2013, has grown to be India’s second-most valuable startup at around $10 billion.  Currently, its services span 1.2 million rooms in more than 80 countries, including 590,000 rooms in China alone, having entered the market in the United States earlier this year.

Agarwal said in a statement: “The continued support of our investors like Softbank Vision Fund, Lightspeed and Sequoia Capital, is a testament to the love, trust and relentless support of our asset owners and customers, hard work of all OYOpreneurs, and our commitment to making #LivingTheGoodLife a reality for over 3.2 billion middle-income people around the world. With the CCI approval now in place, the company will get a capital infusion of approximately $1.5 billion to support this mission, supported by me and other shareholders.

“I am also happy to share that on a year-on-year basis, we have seen that not only are we operating profitably at the building level but at the same time, our EBITDA has also improved by 50 per cent [on a year-on-year basis]. The losses as a percentage of NRV have also been on a steady and significant declining curve.

“The growth across verticals in India and globally has been phenomenal and we truly believe that we will be able to build a truly global brand out of India, while ensuring that the business is run efficiently and with a clear path to profitability.

“Our immediate goal however is to make forward-looking investments so we can achieve our mission, while delivering on our fiduciary responsibility to our investors by building a sustainable business,” he added.

Speaking to Bloomberg, RedSeer Consulting director Ujjwal Chaudhry said: ”Oyo’s valuation signals its scale and growth. The quality of the experience is not top-notch but it’s improving.”

Agarwal founded the startup after dropping out of his college studies in his teens and used his time to travel India, staying in hotels and guest houses in the meantime. After experiencing what he said were “wild and erratic standards” of hospitality, he felt inspired to launch his own startup company that provided a consistent guest experience with exacting standards.

OYO’s offering of rooms varies from vacation rentals, guest houses, leased and franchised hotel rooms, and further living spaces. Its room prices typically range between $25 and $85 per night across its full accommodations offering.

For more information, visit the OYO Hotels & Homes website here.

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