One of the most anticipated deals between the leading budget hotel aggregators – Oyo & Zo Rooms is falling apart. There were a number of rumours over the past few weeks about this possible acquisition as well as a number of media outlets had reported on the deal.
According to a source close to the development, Oyo had reached out to Tiger Global backed Zo Rooms with a buyout offer in a bid to strengthen its share in the budget hotel category. However, it seems that Oyo Rooms may have dropped plans of acquiring its biggest rival, Zo Rooms, which has been struggling to raise fresh funds. Zo’s current monthly expenditure is rumoured to be close to $2.5 Mn.
The deal, an asset sale, has been structured in a way that Zo Rooms’ seven founders and investors including Tiger Global would get a combined 7% stake of Oyo, according to an ET report published yesterday. The report also stated that – Zo’s founding team will exit the company after the transition is complete.
We tried reaching out to early investors of both the companies and are yet to receive their response.
Zostel Hospitality Private Limited, Zo Room’s parent company, was founded in August 2013 by Dharamveer Chouhan, Akhil Malik, Paavan Nanda, Tarun Tiwari, Chetan Singh Chauhan, Abhishek Bhutra and Siddharth Janghu with an initial corpus of $30K (INR 20 Lakh). The startup has two brands i.e. ZO Rooms and Zostel.
Zostel is a chain of backpacker hostels offering all the necessary services like laundry, access to internet, library, board games and other interactive facilities under INR 500 a night. It currently has hostels in Jaisalmer, Pushkar, Rishikesh, Goa, Dalat and 10 other Indian cities. The company has recently launched its hostel in Vietnam.