MUMBAI: Budget hotel aggregator Oyo Rooms is closing a $90-million financing round, split into two tranches, led by its largest shareholder SoftBank, people familiar with the matter said. The company has already received $61 million with the rest of the money slated to come in soon. The $29-million part, a mix of equity and debt, will also largely come from existing investors led by SoftBank. Oyo is picking up $5 million in debt financing from InnoVen Capital, sources privy to the matter told TOI. The budget hotel aggregator’s valuation has remained flat at around $400 million, pre-money. Its other investors include Sequoia Capital and Lightspeed Venture Capital, among others.
VentureNursery, the first investor in Oyo Rooms, has cashed out of the company amid differences which cropped up between the startup accelerator and the hotel aggregator last year. The Mumbai-based accelerator, which held around 2% stake in Oyo, has exited netting Rs 60 crore in a secondary sale of shares. It had put Rs 25-30 lakh in the startup’s first avatar Oravel Stays – an Airbnb clone – between 2012-13. A secondary sale is when an existing investor sells shares to a new one or the promoter at the company’s current valuation, but the money does not come into the company.
The Gurgaon-based firm had picked up a $100-million cheque just a year ago led by SoftBank when it was valued at $400 million, post money, amid a frenetic fund-raising environment. This latest infusion has come about after many months of Oyo being in the market to shore up capital.
When contacted, Ritesh Agarwal, the 23-year-old founder of Oyo Rooms, did not respond to TOI’s query on the development, while a mail sent to Sharvan Shroff and Ravi Kiran, co-founders of VentureNursery, did not elicit a response till the time of going to press.
The dissension between VentureNursery and Oyo began around September-October last year when the company was in the midst of raising new capital topping $200 million. This coincided with the news of Oyo buying its closest rival Zo Rooms in an all-stock deal, giving Zo’s investors a 6-7% stake in Oyo. VentureNursery at the time wanted to exit from Oyo and was against the Zo acquisition, which became one of the reasons the deal was scuppered. TOI first reported in an expansive article in its March 7 edition about how the proposed acquisition had hit a roadblock even as SoftBank declared it as a done deal in its quarterly earnings.
Oyo may look to finally close the Zo acquisition with VentureNursery out of the company, albeit with renegotiated terms and conditions, sources said. Zo went out of business earlier this year as it could not mop up funds and its top investor Tiger Global pulled back from India, only selectively backing a handful of its portfolio companies.
Oyo Flagship the big focus
Earlier in a filing made to the Registrar of Companies, Oyo had said it was raising Rs 413 crore through a proposed rights issue of shares and was looking to buy back shares worth Rs 60 crore from certain investors without disclosing the name of the shareholder.
For Oyo, the fresh capital is largely going to be ploughed into its new offering, Flagship, which currently has 70 operational properties. Oyo Flagship leases properties and services them for better quality experience. Oyo Flagship is a move to fix quality issues which emerged as a big concern for the hotel aggregator after it scaled up its inventory indiscriminately to quash other competitors last year. For now, Oyo’s main business is aggregating properties, where it claims to have 70,000 rooms on its platform across 6,500 hotels in 200 cities. Treebo Hotels, which racked up Rs 112 crore from Bertelsmann India Investments and its existing investors, also picks up full properties but uses the franchise model instead of leasing or owning properties.
All told, Oyo has picked up around $215 million from investors, including the new infusion, most of which has come between 2015-16. One of the most well-funded consumer internet startups, Oyo – which grew frenetically in scale over the past two years – is now finding it difficult to raise capital at high valuation from external investors, as a hopped up tech-investing ecosystem sobers down. Oyo’s biggest backer SoftBank’s India investments were being led by its president & COO Nikesh Arora, who quit abruptly in June, casting a shadow on the telecom and internet giant’s future interest in the country. SoftBank has pumped more than $1 billion across Snapdeal, Ola, Oyo, Grofers and Housing in India.
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