OYO Demerges Its India And International Hotel Business

Indian hospitality unicorn, OYO Rooms is undergoing a structural restructuring to streamline its operations and investor profiles. The company segmented its business under two entities separately handling Indian hotel business, and international and technology business. 

The parent company, Oravel Stays will transfer the Indian Hotel Business to its subsidiary Alcott Town Planners. While, the Oravel Stays will continue housing the technology and international business arms of the company. The reason for this segmentation is said to be the company’s segment specific capital requirements, nature of risk, competition, human, and skill-set requirements among other needs. 

According to the company’s MCA filings accessed by Inc42, technology business has become an independent marketable product to serve various business models and has significant potential for growth in various sectors domestically and internationally. Therefore, it is said to require proper management and undivided attention of experts. Similarly, the International hotel business is said to have its own growth path and specific requirements.  

“The segmentation of business will enable different business segments to grow independently with their focused vision, strategies, and operations. Along with attracting focused investors and strategic partners, and enable investors to separately hold investments which best suit their investment strategies and risk profiles,” the company filing added. 

OYO’s Growth Story

The company was recently reported to be raising a fresh round of $1 Bn funding at a valuation of $10 Bn. This would be almost double its current valuation of $5 Bn.

OYO is currently present in more than 800 cities across 80 countries including Vietnam, UK, US, Japan, China, Malaysia, Nepal, UAE, Indonesia, Saudi Arabia, India and the Philippines. The company is backed by marquee investors, including SoftBank Vision Fund, Sequoia Capital, Lightspeed Ventures, Hero Enterprise, and China Lodging Group. 

The Indian unicorn’s accelerated growth is also complemented by multiple acquisitions including European vacation rental company @Leisure Group, coworking startup Innov8, wedding planning startup WeddingZ, service apartment operator Novascotia Boutique Homes, and IoT company AblePlus. 

Earlier this year, the hospitality chain had announced an investment of INR 1400 Cr for its India and South Asia business. Other high-performing South Asian countries include Malaysia and the Philippines, with 8,000 and 1,300 exclusive rooms respectively.

In December 2018, It has recorded global sales run-rate of $1.8 Bn in December, 2018, growing at 4.3X. At the same time, its India business was growing at 3X with a sales run-rate of $1.2 Bn annually.

Earlier today, OYO founder Ritesh Agarwal was reported to be looking to raise his stake to 30% from the current 10%, and could also buy up stake held by management and employees to take his share of the startup to 32-33%. This would allow Agarwal to wrest back control of the company, and have the second-largest stake in OYO, after lead investor SoftBank, which currently owns close to 48% of the company.

[This development was first reported by ETtech]

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