Pandemic-hit budget hotel chain Oyo may room with Microsoft

US software behemoth in advanced talks to make substantial investment in homegrown start-up, say media reports

Oyo, considered one of India’s mostly highly valued start-ups, undertook an aggressive global expansion over the past few years.

Software giant Microsoft is in ‘advanced talks’ to invest in homegrown budget hotel chain Oyo, according to a TechCrunch report. The Delhi-based firm, which has been seeing steep losses due to pandemic-led disruptions in the travel and hotels segments, is likely to close the deal by Friday, it said. Under the proposed deal, Oyo may move its IT operations to Microsoft’s cloud services, it added.

In 2019, Oyo was valued at around $10 billion. However, Masayoshi Son’s SoftBank, a major investor in Oyo, recently trimmed its valuation to $3 billion, the report said. The details of Microsoft’s proposed investment are not known.

Ups and downs

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TechCrunch recalled that Oyo, considered one of India’s mostly highly valued start-ups, undertook aggressive expansion into markets such as the US, Europe and Southeast Asia over the past few years. It, however, faced bitter feuds with hotel owners, which landed it in legal trouble. Also, it was accused to lapse of governance and a toxic workplace culture, said the report.

Also read: Indian billionaire plans to buy 70 aircraft for low-cost air travel

By the time it sorted out its legal wrangle with hotel owners, the COVID onslaught began and severely impacted its operations. Following the lockdowns across the world, as its occupancy levels plunged, the company laid off thousands of employees.

While the company has not announced details about going public, it recently raised debt of about $660 million, which was deployed to offset previous debt. The recently raised debt has the option of being converted to equity, said the report.

Mega investment

If the deal with Microsoft goes through, it will mark the US company’s single largest investment in an Indian start-up, said TechCrunch. Its other investees in the Asian market include short-video platform DailyHunt, e-commerce major Flipkart and logistics SaaS firm FarEye, it added.

A CNBC report said the travel market is on the mend, thanks to rising vaccination rates and the easing of lockdowns globally. It quoted Oyo founder and CEO Ritesh Agarwal as saying its daily bookings for summer more than doubled in Europe.

The fund-raise from Microsoft may therefore be used to hit the aggressive growth path yet again.

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