On October 7, Oyo Rooms, India’s largest budget lodging start-up, confirmed plans to raise an additional $1.5bn as part of its Series F funding round. Its founder and CEO, Ritesh Agarwal, will spend $700m to buy new shares in the company. Existing investors, including SoftBank, Lightspeed and Sequoia India, will contribute to the rest of the funding round, bringing the start-up’s valuation to $10bn.
Since Oyo was founded in 2013, it has grown into India’s second-most valuable start-up and one of the world’s largest hotel chains
Since Oyo was founded in 2013, it has grown into India’s second-most valuable start-up and one of the world’s largest hotel chains. It currently manages 1.2 million rooms in more than 80 countries. This latest funding round will help the company strengthen its presence in the US, Oyo’s fastest-growing market, and boost its holiday rentals business in Europe.
“The continued support of our investors like SoftBank Vision Fund, Lightspeed and Sequoia Capital is a testament to the love, trust and relentless support of our asset owners and customers,” Agarwal said in a statement.
Oyo’s continued growth will bring some comfort to SoftBank, after WeWork – in which it was a majority shareholder – filed to withdraw its IPO earlier this month.
However, the Indian start-up is in some ways reminiscent of the now-disgraced property company. Like WeWork, Oyo has yet to turn a profit. On top of this, Agarwal’s push to raise his stake in the company – almost unheard of in the Indian start-up sector – mirrors the behaviour of Adam Neumann, WeWork’s founder and former CEO, who shareholders accused of exerting too much influence within the company.
Oyo’s success has also sparked a backlash among hotel operators in India. The start-up has faced criticism for driving down room rates in the country at a time when economic growth is slowing. Moreover, Indian hotel operators partnered with the brand have accused it of exorbitant fee increases.
In September, two hoteliers in the state of Karnataka filed police complaints that the company was deceitfully increasing commissions, accusing Agarwal of fraud. Oyo has denied the allegations, but such damning indictments may continue to haunt the company as it looks to expand globally.