25-year-old Oyo founder triples stake with $2 billion deal

by | Aug 15, 2019 | Chains

Ritesh Agarwal (Picutre: Akio Kon/Bloomberg)

Oyo Hotels and Homes founder Ritesh Agarwal will invest $2 billion to triple his stake in the SoftBank-backed Indian lodgings startup he established in his teens.

Ritesh Agarwal founded Oyo Hotels and Homes as a teenager. Now, he’s investing $2 billion in order to triple his stake in the SoftBank-backed Indian lodgings startup he created.

To accomplish this, Agarwal will buy shares from other existing investors Lightspeed Venture Partners and Sequoia India. Those parties will remain backers of the startup, the company said recently in a statement. All told, the deal will value Oyo at roughly $10 billion, and it will also raise Agarwal’s slice of the company to 30 percent from about 10 percent now, according to those familiar with the matter who asked not to be identified while discussing a private transaction.

In order to complete this deal, the entrepreneur won support from banks and other financial partners, Oyo said.

One of India’s most valuable startups

The roughly $10 billion valuation for Oyo makes it easily one of India’s most valuable startups, with it ranking after One97 Communications, which is the parent of digital payments pioneer Paytm. The e-commerce giant Flipkart Online Services Pvt was acquired by Walmart Inc. last year. That was a $16 billion deal.

Oyo provides accommodation to travelers from India and China who are visiting the United Kingdom or the United States, and with this business model, it great its revenue more than four times larger as compared to June from just a year earlier. Oyo now has a million rooms under its brands, more than 200,000 of which are in India. Agarwal founded the startup as a teen after he dropped out of college and was roaming India on a shoestring budget. The idea came as a result of wild, erratic standards at hotels and guest houses that he encountered. His answer was an online service and a brand that aims to now give travelers a more consistent experience.

To do this, Oyo mostly signs hotel owners and then helps them upgrade everything bathroom fixtures to furniture and better, giving them standardized supplies like sheets and toiletries. They also give them the support they need to train their staff.

More about Oyo

Oyo has grown into a large company, employing hundreds of people in the field.

Those employees evaluate properties based on 200 factors, which range from the quality of mattresses and linens to water temperature. To get a listing and a bright red Oyo sign to hang street-side as a seal of housekeeping approval, most hoteliers must agree to a makeover that typically takes about a month. Oyo then gets a cut of roughly 25% of every booking. Rooms usually run between $25 and $85.

“It is a very exciting time for Oyo right now as we make great living spaces come alive across all corners of the world from Texas to Tokyo,” Agarwal, who is also chief executive officer, said in the statement.

Agarwal will carry out the transaction, which requires both shareholder and regulatory approval, doing so through an entity called RA Hospitality Holdings (Cayman), Oyo said.

“We remain committed to supporting this world-class management team,” Mohit Bhatnagar, managing director of Sequoia Capital India Advisors, said in the statement.

Let’s take a look at a few outstanding hotel projects in India: 

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