Softbank-backed Oyo Hotels Raising $1.5B to Expand into US, Europe

Indian hospitality group Oyo Hotels and Homes today announced that it is raising $1.5 billion to continue its expansion into the US, Europe and other global markets.

25-year-old Oyo founder Ritesh Agarwal is leading the financing round with support from the six-year-old company’s biggest backer, Softbank, Lightspeed Venture Partners and Sequoia India.

The fresh capital for Oyo comes as Softbank continues to take flak from investors in the wake of the failed IPO of WeWork, with Agarwal taking care to emphasise the hotel firms declining losses in the statement.

Founder Borrowing to Buy Back Shares

“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,” Agarwal said, while indicating that the company’s earnings before tax, depreciation and amortisation (EBITDA) has improved 50 percent year on year.

In the new funding round a company controlled by Agarwal will be investing $700 million to buy back shares in Oyo from the current stakes of existing investors Lightspeed and Sequoia India.

According to an account by Bloomberg, the new round, which includes Softbank’s Vision Fund, Lightspeed and Sequoia putting a combined $800 billion into Oyo, values the hospitality chain at $10 billion.

Agarwal will be making his investment with support from banks and financial partners, according to the statement.

Building a Network of 1.2 Mil Rooms

Oyo, which Agarwal founded while still a teenager, now manages 1.2 million rooms in over 80 countries. In the US, Oyo now boasts 7,500 rooms with another 3,500 in the UK.

During 2019 the company says that its revenue has expanded nearly four-fold compared to last year, thanks in part to its having established a network of 590,000 rooms in China and another 27,000 rooms in Indonesia.

Oyo received $1 billion in funding last year led by $800 million from Softbank’s Vision Fund, targetted specifically at growing its business in China. That expansion was not without some speedbumps, however, with reports in the mainland press this year alleging that the Indian unicorn had laid off as many as 1,000 staff. Oyo denied the press reports at the time.

The company, which has also branched out into student housing, vacation home rentals and co-working, licenses independent hostelries to use the Oyo name in return for an average 25 percent of all bookings.

In return for turning over a quarter of their top-line revenue, Oyo’s partners receive assistance with upgrades, standardised linens and toiletries and staff training support.