Oyo Share Buyback Delivers Profit For Sequoia, Lightspeed

With founder and CEO Ritesh Agarwal buying back 15% stake in Oyo in November 2019, general partners (GP) investment firms Sequoia Capital and Lightspeed Venture Partners have collectively earned between $400 Mn and $500 Mn.

Last month, Oyo’s Cayman Island-based subsidiary RA Hospitality bought the 15% shares in the name of Ritesh Agarwal banked by loans from Japanese banks Nomura and Mizuho.

According to a report in ET, general partners in Lightspeed earned a profit of $200 Mn on the $850 Mn deal, whereas Sequoia investors earned $150 Mn on the $450 Mn buy back. Lightspeed held $13.4% stake in Oyo and Sequoia held 10.24% stake. Lightspeed had reportedly invested $28 Mn in the company. Sequoia also invested $25 Mn.

With this share buyback, Oyo’s Agarwal now owns close to 30% stake and Softbank owns around 50%. Moreover, it has also doubled Oyo’s valuation from $5 Bn to $10 Bn.

This is the second-biggest exit in India, after global retail giant Walmart brought 81.3% stake in Indian ecommerce company Flipkart for $16 Bn in 2018. In order to make room for its share, Walmart had to buy the majority of these stakes from other investors Tiger Global, SoftBank, Naspers, Ebay, Accel Partners, founders Sachin Bansal and Binny Bansal among others. Some of these investors continue to back the company, while others got an exit.

Founded in 2013 by Agarwal, Oyo started off its journey as a simple hotel aggregator business. The company’s mobile application and web portal allowed customers to book budget hotel rooms on-day-to-day basis. Oyo started gaining more traction after the company brought in the ‘couple friendly’ features, in 2016, to allow unmarried couples to book hotel rooms without any inconvenience.

Since its launch, Oyo has gracefully transformed itself to a franchise model  by stepping into new categories such as coworking, cloud kitchens and more. The company has raised close to $1.7 Bn in funding. Its investors include Airbnb, SoftBank Vision Fund, Greenoak Capital, Sequoia Capital and Hero Enterprise.

This year alone, OYO has also invested or acquired companies working in different domain of hospitality sector to expand its business to every possible accommodation ranging from holiday homes, casino hotel and coworking spaces in 800 cities across 74 countries. It has been trying to expand into student accommodations and four-star hotels as well.

The company’s product portfolio also includes Silverkey, Pallets, OYO Living, OYO Homes,  OYO Rooms, besides its coliving, coworking and cloud kitchen businesses.