OYO founder funnels $700M into new $1.5B round, valuing company at $10B

India-based hospitality company OYO Hotels & Homes will use its latest funding round - a $1.5 billion Series F - to expand its vacation rentals business in Europe and to grow its overall presence in the United States, where it says it currently has 100 hotels in 21 states.

The new round will include $700 million as primary capital from OYO founder and CEO Ritesh Agarwal through his entity RA Hospitality Holdings and $800 million from existing investors including SoftBank, according to a person familiar with the matter.

Officially, OYO says "Agarwal is being supported by global institutionalized banks and his financial partners."

With this investment, Agarwal’s stake in the company he founded in 2013 will be nearly 30% and the company will be valued at $10 billion, the source says. 

The Series F round is part of a plan Agarwal announced in July for his holding company to sign a $2 billion primary and secondary management investment round with OYO Hotels & Homes. That plan received approval from the Competition Commission of India (CCI) last month.

As part of that announcement, OYO said investors Lightspeed Venture Partners and Sequoia India would sell part of their holdings to help Agarwal increase his stake in the company. 

“The continued support of our investors like SoftBank Vision Fund, Lightspeed, Sequoia Capital is a testament to the love, trust and relentless support of our asset owners and customers, hard work of all OYOpreneurs and our commitment to making #LivingTheGoodLife a reality for over 3.2 billion middle-income people around the world,” Agarwal says.

“With the CCI approval now in place, the company will get a capital infusion of approximately $1.5 billion to support this mission, supported by me and other shareholders.”

OYO says its brands are now located in more than 800 cities in 80 countries in India, China, Malaysia, the Middle East, Indonesia, the Philippines, Japan, Europe, the United Kingdom and the United States – which it says is its fastest-growing market. The company says it has 1.2 million rooms under management in hotels and homes, and its revenue in August 2019 was nearly four times that of August 2018. 

“I am also happy to share that on a year-over-year basis, we have seen that not only are we operating profitably at the building level but at the same time our EBITDA has also improved by 50% (on a year-over-year basis). The losses as a percentage of net realizable value have also been on a steady and significant declining curve,” Agarwal says.

“The growth across verticals in India and globally has been phenomenal, and we truly believe that we will be able to build a truly global brand out of India, while ensuring that the business is run efficiently and with a clear path to profitability.

"Our immediate goal however is to make forward-looking investments so we can achieve our mission, while delivering on our fiduciary responsibility to our investors by building a sustainable business.”

* Check out this interview with Agawal from The Phocuswright Conference 2018.