- Lightspeed had a 13.4% stake, while Sequoia Capital held a 10.24% stake in OYO.
- Lightspeed is set to earn an estimated $1billion from the sale of half of its current 13.4% stake in Oyo.
- The SoftBank Vision Fund owns a major stake of 48% in Oyo.
The Indian hospitality giant OYO Hotels and Homes has recorded a valuation of $10 billion after its founder Ritesh Agarwal decided to purchase $2 billion in shares from the venture capital firms Sequoia Capital and Lightspeed Venture Partners, the company announced on Friday. Lightspeed had a 13.4% stake, while Sequoia Capital held a 10.24% stake in OYO.
Lightspeed, which manages assets of about $310 million in Asia’s third-largest economy, is set to earn an estimated $1billion from the sale of half of its current 13.4% stake in Oyo, a company it had first invested in 2014. In all, Lightspeed has invested about $20 million into the six-year-old company, thereby earning 50X returns on its five-year-old investment.
The firm, along with consumer-focused investment firm DSG Consumer Partners, had first written a cheque for about $600,000 in 2014, which also had secondary components, picking up a 26% stake in the then year-old venture. Separately, Sequoia Capital, which manages assets of about $3.9 billion in the country, will take in about $500 million from the partial stake sale, having put in about $27 million into Oyo, across rounds, having also first partnered with the SoftBank-backed company in 2014.
This is pathbreaking, and is also unique in several aspects for the ecosystem, along with massive value building. After Flipkart and Paytm, this is now the most valued company in the country. It also proves that you can build India-unique models hereto and take it to the world. Agarwal’s move has answered a lot of questions now,” said Krishnan Ganesh, promoter of GrowthStory.
Equally important, given that these stake sales are partial, both firms, will still own over 5.5% each in the company, which is being valued at $10 billion, and are likely to participate in its upcoming capital raising rounds.
Only founders have the long term horizon to build institutions. We need companies to go to IPOs. And for that, founders need higher equity and control. This is a very elegant way of giving control to founders. While Ritesh is the star here, let’s not miss the role of the VCs here who have supported such a transaction,” Anand Lunia, managing partner of IndiaQuotient.
The massive paydays for the two firms, once the transaction receives the necessary regulatory clearances, will put in shade the $3 billion estimated to have been earned by New York-based Tiger Global Management, the hugely-influential investment firm.
Agarwal’s estimated $2.2 billion transaction will see the founder of the hospitality chain raise his stake in the company about threefold to around 30%. The SoftBank Vision Fund owns a major stake of 48% of Oyo, which said that the investment has been made through Cayman Islands-registered RA Hospitality Holdings. Ritesh Agarwal, along with the management, is now set to emerge as the second-largest shareholder after the Soft-Bank Vision Fund.
Only founders have the long-term horizon to build institutions,” said Anand Lunia, managing partner of early stage investment firm India Quotient. “We need companies to go to IPOs. And for that founders need higher equity and control. This is a very elegant way of giving control to the founder. While Ritesh is the star here, let’s not miss the role of the VCs here who have supported such a transaction.”
OYO has raised a whopping $1.6 billion in equity funding to date, reaching a valuation of $5 billion at its last funding round. Some other investors in the company include Airbnb, Didi Chuxing and Grab Holdings. OYO is now active in 800 cities in 80 countries. It has recently become the third-largest hotel chain in the world by room count with more than 23,000 hotels in its portfolio. Recently, the company announced plans to invest $300 million in the U.S. market, where it is currently operating more than fifty OYO Hotels in 35 cities and 10 states.