Indian hospitality chain Oyo sets up JV with SoftBank to buy hotel assets

An attempt to be the numero uno in the world-wide hospitality industry

Photo by Ravi Shekhar on Unsplash

Gurugram-based hospitality chain Oyo Hotels & Homes—one of the few decacorn (startups valued over USD 10 billion) companies from India—is making quick moves with a three-pronged strategy to consolidate its position as the world’s third largest hospitality company.

Oyo’s parent company Oravel Stays has partnered with SoftBank-owned entity SB Topaz to set up two joint ventures in India—Mountainia Developers and Hospitality, and MyPreferred Transformation and Hospitality, local media Economic Times reported, citing Oravel’s regulatory filings accessed by data platform Paper.vc.

While Mountainia Developers acquires real estate assets including empty land and fully-developed properties, MyPreferred Transformation deals with renovation and refurbishment of hotels and related assets in India. OYO has also set up a third entity—OYO Financial and Technology Services.

“OYO is a growing company which needed certain restructuring to ensure that the best interests of the company is established. This is a routine business structuring and we have no further comments to share on the same,” a company spokesperson told Economic Times.

Six-year-old Oyo that started out with offering budget hotels in India, has since expanded its business overseas and is on a buying spree of premium hotel properties and vacation homes. It also plans to create a global property fund to back its ambition of buying and leasing hotel properties across the world.

Founded by Ritesh Agarwal, Oyo is keen on lapping up the best in the four-star luxury hotel segment. Earlier this month, the company paid USD 5 million to acquire luxury hotel Fortune Select Metropolitan run by India’s premier hotel chain ITC Hotels.

In April this year, US-based home-sharing platform Airbnb invested USD 200 million in Oyo as part of its Series E round. According to media reports, it is further seeking to raise USD 750 million to 1 billion, expected to be led by SoftBank which might zoom Oyo’s valuation to the range of USD 13.5 to 15 billion. The funds are likely to be used for large-scaled diversification and day-to-day running of its elite properties world-wide. In the last year and half, Oyo has entered a number of international markets including China, Philippines and Indonesia. It claims China is already one of its largest markets after India.

Oyo’s net loss in financial year 2018-19 has risen to Rs 512 crore (USD 72 million) compared to the net loss of Rs 360 crore (USD 50 million) in 2017-18, Aditya Ghosh, chief executive officer at Oyo, told media in April this year.