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OYO receives infusion of $807M from SoftBank and RA Hospitality Holdings

Hospitality unicorn OYO Hotels & Homes has revived a tranche of $807 million of its Series F round of $1.5 billion it announced in October last year.

The funds will help OYO achieve its strategic objectives for 2020, which include accretive and sustainable growth, operational excellence and investment in corporate governance and training.
 
Hospitality unicorn OYO Hotels & Homes has revived a tranche of $807 million of its Series F round of $1.5 billion it announced in October last year. The fresh tranche has come from existing investors SoftBank and Founder Ritesh Agarwal-owned RA Hospitality Holdings.
 
According to the report, $506.75 million has been infused by the SoftBank, which will hold a 50.6% stake in the hospitality unicorn via SVF India Holdings, while on the other hand, RA Holdings will have 25.87%.
  
According to the company’s filings with the Registrar of Companies (RoC) sourced by business signals platform Paper.vc,  OYO has allotted a total of 15,325 Series F compulsory convertible cumulative preference shares (CCCPS) to the two entities at a price of $52,643.22 per share. SVF India Holdings has subscribed to 9,626 Series F CCCPS for about $507 million while RA Hospitality has injected about $300 million for 5,699 shares. Post the allotment of shares, SVF India Holdings and RA Hospitality hold 50.59 per cent and 25.87 per cent, respectively, in OYO, the filings show.
 
OYO had incorporated a clause in its charter in 2017 that restricted SoftBank from increasing its stake in the company beyond 50 per cent without prior approval from the founder and its largest minority investors. 
 
Last October, OYO had announced that Agarwal will invest $700 million into the company, while the rest will be contributed by its largest investor SoftBank and other unnamed investors. The Gurugram-based company also counts Lightspeed Venture Partners and Sequoia India among its backers.
 
At the time of announcing the Series F funding the unicorn had stated that the funding will be focused on Oyo’s growth in the US, and to also strengthen its position in the vacation rentals business in Europe.
 
This year, OYO has been in the news for various reasons including mass firings, IT raids at its Gurugram office, and vendor fallout. However, recently, OYO was also featured in a Harvard case study, which talks about the company’s journey, challenges, and growth. 
 
At the time of layoffs and allegations, Ritesh had written an email to his employees explaining the recent firings in the company, and charting out the startup’s 2020 plans. He stated that the company plans to increase efficiency while focussing on core businesses and rationalising growth avenues, focus on profitable locations and buildings, avoid growth that dilutes the unicorn’s margins, and further reduce operating costs. 
 
Since its inception in 2012, OYO has aggressively expanded to 800 cities in 80 countries, including the US, the UK, and the Middle East, besides a host of European countries over the last two years. Meanwhile, in Asia, it has expanded its operations to China, Malaysia, Indonesia, and Japan. The company currently counts India and China among its largest markets. OYO’s revenue increased to $951 million for the fiscal year ended March 2019 from $211 million a year ago. Losses climbed to $335 million from $53 million as it expanded into China and other new markets. India accounted for roughly 63.5 per cent of its revenue in fiscal 2019, down from 99 per cent the year before. In India, it has reportedly consolidated teams across its Oyo, Town House and cloud kitchen businesses. It’s also looking to scale down its co-living business Oyo Life. 

-Authored by Ayush Sharma (Content Developer, Startup-Monk)

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CIN- U74999DL2019PTC347107