NEW DELHI: Hospitality unicorn OYO's valuation has almost doubled in a year, reaching USD 10 billion between September 2018 and October 2019, despite significant losses in the financial year ending on March 31.
The losses have reportedly mounted due to the rise in operating expenses fuelled by the company's aggressive expansion in overseas markets. Provisional net loss of the company jumped from Rs 360.43 crore in the previous financial year to Rs 2,384.69 crore this year, according to unaudited financials prepared by a valuation expert.
But this did not reduce the growth in the valuation of the company backed by Japanese billionaire Masayoshi San's Softbank Vision Fund. The major boost came from the USD 700 million investment made by OYO CEO Ritesh Agarwal in October this year through RA Hospitality Holdings (Cayman).
OYO announced in October that it would raise USD 1.5 billion in the Series F funding round, whereby RA Hospitality Holdings will infuse approximately USD 700 million as primary capital in the company, with the balance USD 800 million being supplemented by other existing investors.
A significant part of the funds will be diverted towards its growth plans in the US market, and in strengthening the company's position in the vacation rentals business in Europe, the company said.
Earlier this year, RA Hospitality Holdings received Competition Commission of India approval to invest USD 2 billion in OYO. "In order to facilitate this transaction, Lightspeed Venture Partners and Sequoia, are selling part of their shareholding in OYO to help the founder increase his stake while remaining invested and committed to the company's long-term mission," OYO said.
OYO had raised over USD 1 billion in its last financing round, announced in September 2018, led by SoftBank through SoftBank Vision Fund, with participation from existing investors Lightspeed Venture Partners, Sequoia and Greenoaks Capital and supported by new strategic partners like Airbnb.
OYO is present in over 80 countries. As per the company, it witnessed "3.8x" year-over-year revenue growth in August 2019. However, the company's growing losses provoke comparison with the struggling co-sharing workspace company WeWork which recently laid off 2,400 employees following its failed attempt to go public.
This long-anticipated layoff is the biggest move by Japanese technology conglomerate SoftBank Group Corp, which is providing a USD 9.5 billion lifeline and will soon own about 80 per cent of WeWork's shares.