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Oyo Secures New Funding Round, Now Valued at $2.5 Billion

Indian budget-hotel giant faces valuation drop amid funding challenges, targets high-net-worth investors for new capital injection
June 17, 2024

Oyo, the prominent Indian budget-hotel startup, is set to finalize a fresh funding round between $100 million and $125 million, which significantly reduces its valuation to $2.5 billion, according to insiders who spoke with TechCrunch.

This marks a substantial drop from the company's $10 billion valuation in 2019. The Gurgaon-based startup has faced challenges in attracting institutional investors, leading it to target high-net-worth individuals in recent months.

“We genuinely feel that this asset makes a lot of sense today. Being profitable and @70% discount to the previous valuation. Listing expected in 18-24 months,” a representative of InCred, a financial firm working with Oyo, conveyed in a message seen by TechCrunch.

Earlier reports suggested Oyo was aiming to raise funds at a valuation of $3 billion or less, which the company denied at the time. The new funding round may potentially be larger, sources revealed, though they requested anonymity as the details are not yet public.

This funding comes after Oyo's decision to delay its IPO plans last month. The startup, which boasts backers such as SoftBank, Peak XV Ventures, Lightspeed, Airbnb, and Microsoft, has twice withdrawn its IPO application from the Securities and Exchange Board of India (SEBI) in the past four years.

Oyo first filed for an IPO in 2021 but retracted and resubmitted the paperwork in 2023. The company, which has raised over $3 billion to date, aimed to secure $1.2 billion at a $12 billion valuation in the 2021 IPO attempt.

Once one of India's most celebrated startups, Oyo offers a platform that enables hoteliers to manage digital bookings and payments. The company once operated extensively across the U.S. and Europe but has since scaled back its international operations.

Despite the setbacks, Oyo reported a net profit of $12 million for the financial year ending in March, as noted by founder and CEO Ritesh Agarwal.

In 2019, Agarwal took on $2 billion in debt to increase his stake in Oyo when it was valued at $10 billion. He injected $700 million as primary capital and spent $1.3 billion on a secondary purchase of shares. The current status of this debt remains undisclosed by the company.

The Economic Times also reported on the new funding round, noting that Oyo will seek approval from existing shareholders this week.

Oyo's journey from a $10 billion valuation to its current standing at $2.5 billion reflects the volatile nature of the startup ecosystem, where rapid growth is often followed by significant readjustments. Despite these challenges, the company's focus on profitability and strategic adjustments suggest a resilient path forward.

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