The battered Indian hospitality startup Oyo may have found yet another backer in Microsoft, just two weeks after receiving USD 660 million in debt funding from global institutional investors.
The SoftBank-backed startup is in advanced discussions with the American tech giant to raise a new round at a USD 9 billion valuation, said a report by TechCrunch. Oyo’s valuation had dropped to USD 8 billion in mid-2020 amid the COVID-19 pandemic, from USD 10 billion in November 2019. After Oyo raised USD 7.4 million from Hindustan Media Ventures in January 2021 as a part of its extended Series F round, its valuation reportedly again hit USD 9 billion. However, Financial Times reported in March that SoftBank—which owns a 46% stake in Oyo—had slashed its valuation down to USD 3 billion, with the hospitality unicorn scaling down its global expansion plans.
Microsoft will join other strategic investors, including Chinese ride-hailing giant Didi Chuxing, Southeast Asian ride-hailing firm Grab, and American hospitality firm Airbnb on the cap table of Oyo, which also counts Sequoia Capital, Lightspeed Ventures, and Hero Enterprise as backers.
While Oyo, one of India’s most valuable startups, had already been on a bumpy ride in the past few years due to operational missteps and headlong expansions, the COVID-19 global public health crisis has added to its woe.
When COVID-19 first hit India last March, it forced millions of people to remain indoors, eradicating the demand for travel and hotel companies. The situation was on its way to turning around at the beginning of this year as India seemed to have the health crisis under its control, before an unexpected second-wave outbreak across the country once again locked millions inside, dimmed hopes of a recovery in the tourism and travel sector, and disrupted Oyo’s recovery plans in its home market.
With the hospitality segment beginning to see early signs of recovery in India post the second COVID-19 wave, Oyo is expected to use the fresh capital to scale up its technology platform and grab more market share.
The move comes shortly after Oyo revealed that it was preparing for an IPO by the end of this year. Industry veterans believe the potential Microsoft investment is a step toward bringing in more strategic investors onboard ahead of going public.
Microsoft seems to be stepping up its investments in India. Last year, the company invested in news aggregator and short-video platform DailyHunt as well as in logistics SaaS firm FarEye from M12, a venture fund by Microsoft for which it set up an India office in June 2020.