08th May 2024 – Oyo, the the popular Indian budget hotel chain startup, is currently in discussions with investors to secure a fresh round of funding, potentially resulting in a valuation of $3 billion or less, according to three sources familiar with the matter speaking to TechCrunch.
Sources, preferring anonymity due to the sensitive nature of the topic, revealed that Oyo is actively engaging with investors, including Malaysia’s sovereign wealth fund Khazanah, for this new funding endeavor. It’s anticipated that this funding round may involve secondary transactions, potentially valuing the startup as low as $2.5 billion.
If these proposed terms materialize, it would signify a significant decline from Oyo’s peak valuation of $10 billion, achieved during a funding round in 2019. Furthermore, a valuation below $3 billion would fall short of the capital Oyo has amassed through equity and debt financing over the years.
However, it’s worth noting that discussions for this new funding round are ongoing, and the terms may undergo alterations, or the round might not come to fruition, as cautioned by the sources.
This potential valuation adjustment isn’t entirely unexpected, as SoftBank, holding more than 40% of Oyo, internally revised the startup’s valuation to $2.7 billion in 2022. Oyo contested this valuation downgrade, stating that it lacked a “rational basis.”
Despite rumors surrounding the valuation, Oyo, with backers like SoftBank, Airbnb, Peak XV Partners, and Lightspeed Venture Partners, asserted that there were no concrete transactions in progress. Khazanah, however, did not provide any comment on the matter.
Oyo emphasized its continued focus on improving performance and profitability, affirming that while it engages with potential investors, no discussions regarding valuation have taken place at this stage.
These funding deliberations come on the heels of Oyo withdrawing its draft red herring prospectus for an initial public offering (IPO) for the second time. Initially, the Indian startup had filed paperwork for an IPO in 2021, aiming to raise around $1.2 billion at a $12 billion valuation. However, India’s market regulator, SEBI, has yet to approve Oyo’s IPO application.
According to reports from local media outlets, Oyo’s founder and chief executive, Ritesh Agarwal, informed employees that the company anticipates revenue for the fiscal year ending March to exceed $682 million.
Conclusion
Oyo’s potential valuation adjustment and ongoing funding discussions highlight the dynamic nature of the startup landscape. While challenges such as IPO setbacks and valuation fluctuations persist, Oyo remains focused on its mission of delivering value to stakeholders and driving business growth.
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