Oyo Rooms has been a game-changer in the hotel industry. With its innovative business model, the company has managed to capture the attention of the Indian consumer. Oyo disrupted the hotel sector by offering standardized, affordable rooms to travelers.
With its meteoric rise, Oyo has garnered the interest of investors seeking to capitalize on its growth. In this article, we will take a deep dive into one of the country’s earliest and most popular unicorns.
Oyo Company History
Founded in 2013 by Ritesh Agarwal, Oyo Rooms started as a simple idea to solve the problem of inconsistent quality and pricing in the Indian hotel industry. The company began by aggregating budget hotels on its platform, standardizing their offerings, and making them available to travelers at affordable prices. Within a short span, Oyo expanded its footprint across India, entering into international markets like China, Europe, and the United States.
Oyo’s rapid growth has attracted significant investments from leading global investors, including SoftBank Group, Sequoia Capital, and Microsoft. The company reached unicorn status in 2018, with a valuation of over $5 billion. Today, Oyo is one of the largest hotel chains globally, with a presence in over 80 countries and thousands of properties under its umbrella.
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How to Buy Oyo Shares
Oyo is not a listed entity on the Indian stock exchanges, so you will not be able to buy Oyo shares or check the Oyo share price. However, that may change soon. The company has been looking to go for an IPO. It filed its draft red herring paper (DRHP) with the capital markets regulator SEBI in 2021.
The company then filed an addendum to its earlier submitted DRHP in September 2022, and then in November 2022. However, the DRHP was sent by SEBI, and the company was asked to file the papers again. Media reports suggest that the company has refiled DRHP under the confidential pre-IPO filing process.
The company had initially filed for a ₹8,430 crore IPO. However, media reports suggest that they may have cut down the issue size in the latest filing. So, once the company gets SEBI’s nod the road for an Oyo IPO will get smoother. So you may soon be able to invest in Oyo shares or check the Oyo share price and invest in the Oyo IPO.
Before investing in Oyo shares, it is crucial to understand the company’s financial health. Despite its impressive growth, Oyo has faced challenges in maintaining profitability. The company’s aggressive expansion strategy, coupled with significant investments in technology and marketing, has resulted in substantial operating losses.
As per the DRHP, the company saw its revenue from contracts with customers plunge close to 70% year-over-year in FY21 (April 2020- March 2021) to ₹3,961.6 crore. The significant drop was majorly due to the impact of the COVID-19 pandemic. The revenues recovered in FY22 (April 2021-March 2022) going up 20% YoY to ₹4,781.4 crore.
The company booked a loss of ₹3,944.8 crore in FY21. Losses, however, contracted by over 50% in FY22 to ₹1,939.8 crore. Ritesh Agarwal’s salary for FY22 was ₹5.64 crore more than quadruple the ₹1.62 crore he took home in FY21.
Alternate Investment Idea: Competitors
If you are looking for alternative investment options within the hospitality sector, you can consider investing in Oyo’s competitors, such as EaseMyTrip, Indian Hotels Company Limited, and Lemon Tree Hotels. While EaseMyTrip is a fellow new-age tech startup just like Oyo, IHCL and Lemon Tree are more established brands in the hospitality sector.
However, one should note, that Oyo has a unique model where it not only offers Hotel stays but also has a huge aggregator and app component in its business model. It also differs from legacy listed hotel stocks as it lends out its franchise to existing properties in addition to setting up its own properties. So you should keep in mind that the above-mentioned competitors do not offer a like-to-like alternative for investing in Oyo Room shares.
Factors Affecting Oyo Performance:
Several factors can impact Oyo’s performance, including:
- Market conditions: The performance of the hospitality industry is closely tied to the overall economic conditions. A slowdown in the global economy or regional markets can affect the demand for hotel accommodations, impacting Oyo’s revenue and profitability.
- Competition: Oyo faces stiff competition from traditional hotel chains, as well as online travel agencies and other aggregators. An increase in competitive pressures may result in price wars and reduced margins for the company.
- Regulatory environment: Changes in government policies, regulations, and taxation can influence Oyo’s operations and financial performance. For instance, stricter regulations on short-term rentals could affect the company’s growth prospects.
- Brand reputation: Oyo’s brand value plays a significant role in attracting customers and partners. Any negative publicity or incidents that tarnish the company’s image can have a lasting impact on its business.
- Technology and innovation: Oyo’s ability to stay ahead of the curve in terms of technology and innovation is critical to its success. The company must continue to invest in its digital platforms, data analytics, and customer experience to maintain its competitive edge.
- Expansion and growth strategy: Oyo’s aggressive expansion strategy has been a double-edged sword. While it has propelled the company to new heights, it has also resulted in mounting losses. The company’s ability to balance growth with profitability will be a key determinant of its long-term success.
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Editor’s Note: Artificial intelligence was used as a secondary aid in the writing of this story.
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