Indian Economy News

Oyo to raise another US$ 1 bn as it adds stars to its hotels

  • IBEF
  • September 23, 2019

Oyo is eyeing US$ 750 million to US$ 1 billion in fresh funds in its parent company Oravel Stays over the next few months, according to sources close to the development. The SoftBank Group might lead the funding round, which will push Oyo's valuation to US$ 13.5-15 billion.

Oyo is likely to spend the funds on massive diversification, an executive in the know told this newspaper. Among other things, the Ritesh Agarwal-led group is planning to manage and operate five-star and luxury properties globally.

This fresh round of funding is separate from the recent US$ 1.5 billion share buyback orchestrated by Agarwal. The firm was valued at close to US$ 10 billion at that point. The Competition Commission of India has approved Agarwal's share buyback plan.

Oyo has undergone wholesale corporate restructuring, setting up several subsidiaries and bifurcating operations globally.

Agarwal has moved from executive director to a non-executive director in Oyo’s India operation to allow him to take up a more active role in the global operations of Oravel Stays Singapore Pte.

"It is our ultimate holding entity for all our global operations. My deeper engagement in the global business is a natural progression, given our continued growth over the last couple of years and the opportunities in the US, Europe, China, and Southeast Asia," said Agarwal in a recent interview to Business Standard.

He added that the move was part of ongoing structural changes introduced over the last year as Oyo expanded its global operations. It did not, he said, alter his commitment to India, a key home market which continues to grow. Moreover, he will continue to be on the board of Oyo's global parent entity, Oravel Stays.

Sources said Oyo's investors have been waiting for it to go through this corporate restructuring before the next funding round. Globally, the company has been trying to diversify its portfolio. In the next level of growth, it plans to take up luxury hotels in India and abroad. Sources said around 25 ‘ultra-luxury’ properties might be opened globally over the next few months.

Oyo has been on the lookout for property companies, which will acquire these hotels, while Oyo will be the day-to-day operating partner.

Sources said that the lion's share of the next round of funding will be earmarked for acquiring these luxury properties. The remainder will be spent on adding more co-working, co-living, and student housing spaces, which the company is so bullish about that it might take these operations abroad.

In some cases, Oyo has also been acquiring a minority stake in property companies. It has partnered with Gurgaon-based hospitality firm Mountania Developers to acquire and redesign an Ahmedabad-based property into a luxury hotel.

"In future, most of the luxury properties Oyo decides to run will be mostly taken up by Mountania in India. Globally also, Oyo is finding such partners," said a source.

The company recently rebranded Hooters Casino Hotel in Las Vegas as a 657-room and 35,000 square-foot casino called Oyo Hotel & Casino Las Vegas in partnership with hospitality investment and management company Highgate.

Oyo claims to have a strong balance sheet, with over US$ 1.5 billion and over a million rooms under management across hotels and homes globally, of which 200,000 are in India.

 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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