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Oyo Rooms are raising $1.5 billion funding from founder Ritesh Agarwal, SoftBank Group Corp., and other investors as India’s hospitality company grows into foreign markets such as the U.S. and Europe.
- Agarwal, who founded Oyo Rooms in 2013, turned it into India’s second most valuable startup with a valuation of approximately $10 billion.
Oyo Rooms are raising $1.5 billion funding from founder Ritesh Agarwal, SoftBank Group Corp., and other investors as India’s hospitality company grows into foreign markets such as the U.S. and Europe.
Agarwal, 25, will spend $700 million on buying new company shares as part of a $2 billion strategy previously reported to triple its ownership stake. All the existing investors as Vision Fund of global investors SoftBank, Lightspeed Venture Partners and Sequoia India will contribute to the remainder of the current round.
Agarwal, who founded Oyo Rooms in 2013, turned it into India’s second most valuable startup with a valuation of approximately $10 billion.
The network occupies 1,2 million rooms, including 590,000 rooms in China, in over 80 countries. Earlier this year, it reached the United States and now has 7,500 rooms in 60 cities.
“We really believe we can create a truly global brand out of India while ensuring that the business is run efficiently and with a clear path to profitability,” said Agarwal in a statement.
In July, the young founder made headlines with plans to spend $2 billion to increase his stake in the company from about 10% to 30%. According to people familiar with the transaction, Japanese banks Mizuho Financial Group Inc. and Nomura Holdings Inc. are bankrolling the stock purchase of Agarwal.
He is purchasing some of those shares from Sequoia and Lightspeed and executes the trade through an entity called RA Hospitality Holdings, Oyo said.
Agarwal triples down on the business he founded at a time when WeWork is going through internal conflicts and a series of disappointing IPOs are raising questions about the start-up price tags. Following One97 Communications, the parent of digital payments pioneer Paytm, the valuation of $10 billion makes Oyo India the most successful company. Last year, Walmart Inc. purchased e-commerce giant Flipkart Online Services Pvt in a $16 billion transaction. At Oyo, Paytm and WeWork, SoftBank’s investments boosted the valuations.
After dropping off college and wandering India on a shoestring budget, Agarwal founded the company in his twenties. He was inspired by the wild, inconsistent standards he experienced at hotels and guest houses to begin the online service, and the company now strives to provide a consistent experience for travelers.
Oyo signs primarily on hotel owners and then helps them update everything from bathroom fittings to furniture and bedding, and then provides them with standardized materials such as sheets and toiletries, as well as resources for training their employees.
It employs hundreds of people in the field who test properties from the value of mattresses and linens to water temperature on some 200 parameters. To get a list, along with a bright red Oyo sign to hang on the street side as a seal of approval for housekeeping, most hoteliers have to agree to a makeover that typically takes around a month. Oyo then gets about 25 percent of every reservation cut. Rooms typically range from $25 to $85.
