New Delhi: Tech giant Microsoft is in advanced stages of talks to invest in Gurugram-based hospitality major Oyo, valuing the Indian startup at about $9 billion, a source close to the deal revealed. The proposed size of the investment is unclear, however, the deal may close as soon as Friday, as per the source.
Indian budget hotel chain was valued at about $10 billion in 2019, although SoftBank, a major investor in Oyo, had slashed the Indian startup’s valuation to $3 billion in recent quarters given to the significant loss of its business to the pandemic.
The pandemic hit the seven-year-old startup like a “cyclone, as just when the startup was pledging to improve its relationship with hotel owners, the pandemic arrived. In response, Oyo slowed its growth and laid off thousands of employees globally earlier this year as nations across the world enforced lockdowns.
Meanwhile, this big transaction may include OYO using Microsoft’s cloud services, according to the sources. This is a milestone transaction as OYO is the first Indian company to raise capital through the TLB route, OYO claimed. The hospitality major is also preparing for an Initial Public Offering (IPO).
OYO has been looking to ramp up its suite of technology products for the hospitality industry. These products include CO-OYO, OYO OS, OYO YO!, OYO Tariff Manager, OYO Secure, OYO Wizard, and the consumer-facing OYO App, among others.
This month, when OYO announced its Term Loan B (TLB) funding of $660 million from global institutional investors, it said that it will utilise these funds to retire past debts, strengthen the balance sheet, and other business purposes, including investment in product technology.
At the time of TLB funding, OYO said that it is the first Indian startup to be publicly rated by Moody’s and Fitch, two of the leading international rating agencies. Fitch and Moody’s rated OYO’s senior secured loan B and B3 (stable outlook), respectively, on the back of the company’s sound business model and resilient financial profile with significant potential upside.
OYO was started in 2013 by Ritesh Agarwal, who began his entrepreneurial journey with one hotel in Gurugram. The hospitality major now has more than 43,000 hotels with over one million rooms. Through its vacation homes business, the company offers travellers and city dwellers access to over 130,000 homes around the world. OYO today operates in over 800 cities in 80 countries.