Oyo, the Indian budget-hotel chain startup, is reportedly in the final stages of raising a new round of funding worth around $100 million to $125 million. However, this funding round will come at a cost, as it is expected to significantly reduce Oyo’s valuation from $10 billion in 2019 to $2.5 billion. The startup has been facing challenges in securing investments from institutional investors and has instead turned to pitching high-net-worth individuals.
Despite the decline in valuation, representatives from financial firm InCred believe that Oyo’s current value presents an attractive opportunity for investors. They highlight the startup’s profitability and the significant discount compared to its previous valuation. InCred expects Oyo to list on the stock exchange within the next 18 to 24 months.
Last month, Oyo decided to put its plans for an initial public offering (IPO) on hold. The company, which boasts prominent backers such as SoftBank, Peak XV Ventures, Lightspeed, Airbnb, and Microsoft, has withdrawn its IPO application from the Indian markets regulator twice in the past four years. Initially, Oyo filed paperwork with the Securities and Exchange Board of India (SEBI) in 2021 but later refiled in 2023. The IPO was intended to raise $1.2 billion at a valuation of $12 billion.
Oyo’s business model revolves around providing a digital platform for hoteliers to manage bookings and payments. While it previously operated in multiple markets, including the U.S. and Europe, the startup has scaled back its international operations.
Founder and CEO Ritesh Agarwal announced that Oyo achieved a net profit of $12 million in the financial year that ended in March. However, little information is available regarding the $2 billion debt Agarwal took on in 2019 to increase his stake in Oyo.
Reports suggest that the new funding round for Oyo could be finalized as early as Tuesday, indicating that the startup is making progress in securing the necessary investment. Despite the decline in valuation, Oyo remains a significant player in the budget-hotel market, and this funding will provide the company with the necessary capital to continue its operations and potential expansion in the future.
