Homegrown Hotel Aggregator OYO Acquires Chennai-Based Novascotia Boutique Homes

Gurugram-headquartered hotel aggregator OYO has announced the acquisition of  Chennai-based service apartment operator Novascotia Boutique Homes. This comes days after OYO announced its acquisition plans both internationally and in the country.

According to the reports, the negotiations of this deal started in October 2017 and concluded in February 2018. It is being speculated that OYO acquired Novascotia for $1 Mn (INR 6.71 Cr) in an all-cash deal.

As OYO marks its entry into the service apartment and corporate executive stay segment, the company’s CEO Ritesh Agarwal said, “We are thrilled that our very first business acquisition involves an established brand like Novascotia. Though in the niche segment of boutique homes, Novascotia brings with it the expertise in catering to the corporate travel segment, an area we have seen great potential and established ourselves as the market leader with varied offerings across 230+ cities including all major corporate hubs. The acquisition forms an integral part of our inorganic growth plan, in line with our ambition to create beautiful and quality living spaces and adding value to every form of real estate. The acquisition will help the company reach its stated target of having 180K rooms by end of 2018.”

At present, about 70,000 rooms operate under the OYO brand.

Founded by G. Madhu Manohar and Girja Madhu, Chennai’s Novascotia Boutique Homes manages 350 rooms in five cities – Chennai, Coimbatore, Hyderabad, Kochi, and Trivandrum. Some of its corporate clients include EY, Cognizant Technologies etc. Its 64 employees will be absorbed by OYO in different roles.

On the acquisition, G. Madhu Manohar and Girja Madhu, Co-founders, Novascotia, said, “Novascotia is a brand built over years with a lot of commitment and hard work. With OYO, we saw similar passion towards solving a problem and we are thrilled to become a part of the entity which is driven by perseverance and innovation. We are convinced that OYO with its wide experience in the hospitality business and hunger for delivering quality customer experience has every potential to take the Novascotia brand promise of ‘home away from home; forward.”

In a media statement, the company claimed that the acquisition also brings great support to OYO’s already deep operational teams. It has a very strong presence in the southern hubs, along with very strong corporate clients. This is probably the first in a series of acquisitions, partnerships, collaborations, and innovations that OYO will create.

At present, OYO manages about 16,000 rooms in 900 exclusive hotels in South India, spread across Karnataka, Andhra Pradesh, Tamil Nadu, Telangana, and Kerala.

OYO Goes Shopping

Earlier, Inc42 reported that OYO was looking at prospective acquisitions and was exploring various companies from hotel companies to IoT(internet of things)-based technology platforms.

At the time, Agarwal added that the company was looking at mature bootstrapped companies, regardless of their revenue, and was in talks with some such companies. It plans to use a significant portion of its Series D funding of $250 Mn from SoftBank to further its acquisition plans. Later in September 2017, the company also raised $10 Mn from China Lodging Group Limited.

The company is currently involved in a courtroom battle with its failed acquisition, ZO Rooms. Recently, a Gurugram-based district court rejected an arbitration petition filed by budget hotel aggregator ZO Rooms against the company on the grounds that it lacked jurisdiction.

In 2016, OYO had signed a term-sheet to acquire the assets of ZO Rooms. However, after a long delay, OYO called off the deal. In February, OYO filed a criminal case against ZO Rooms stating alleging continuous inconvenience and harassment by Zo Rooms founders.

Despite this, the company is engaged in strengthening its foothold and expanding its services in the industry. One milestone was its renewed partnership with MakeMyTrip, which after two years of delisting OYO, added the company back to its portfolio of services recently. Under the partnership, OYO’s chain of hotels will be listed and available for booking on MakeMyTrip and GoIbibo portals.

In a media statement, the companies claimed that the partnership will add momentum to India’s rapidly growing travel sector by bringing together OYO’s economy, mid-segment and vacation rental assets and MakeMyTrip’s travel customer base, along with GoIbibo and RedBus.

As the company tries to enter the Chinese market, it launched its Asset Management in August last year, which will help the company build a nationwide network of hotels through a partnership with real estate asset owners.

In October 2017, it also partnered with online hotel and travel booking platform Yatra Online to widen its access to customers. On the business front, the company has seen a steady growth.

As per company’s regulatory filings, the company incurred losses of $77.35 Mn (INR 496 Cr) in FY 2015-16. However, it recorded a decrease in its losses in FY 2016-17 to $54 Mn (INR 363.7 Cr). The company recorded revenue of $19.2 Mn (INR 125 Cr) in FY 2016-17.

Amid expansion plans, Novascotia Boutique Homes come as the first of many acquisitions the company has planned with its deep pockets. Therefore, we will have to wait and watch for the next category OYO adds to its portfolio.