OYO Rooms to close $250 million funding deal with SoftBank; to be valued at $850 million

OYO Rooms, India’s leading online budget hotel rental provider, is closing a $250 million capital funding round from SoftBank, the Japanese internet and telecom group. The deal will value the online marketplace at $850 with SoftBank’s ownership at 42%, significantly higher than the 27% shareholding it had earlier. Although it is a material amount, the size of the funding round is still half of the $500 million proposed by Softbank in February’17. It is believed that many early investors in OYO were reluctant to have such large funding round and give more than 50% ownership to the Japanese firm after Snapdeal fiasco. However, the startup is facing issues in onboarding new investors, and thus is heavily dependent on Softbank now.

The hotel aggregation industry in the country is going through a consolidation phase with Zo Rooms being acquired by OYO, and MakeMyTrip and GoIbibo merging to form a single large entity. Also, the aggregators are moving away from the Online Travel Agents (OTAs) such as MMT, Ibibo. While OYO moved away from OTAs last year, recently Treebo Hotels also delisted itself from MMT citing high commissions.

OYO will leverage the capital to expand its reach further and growing new formats like OYO Townhouse for which the company is forging partnerships with property developers. Under the new service, it leases properties and services them for better customer experience in a move to fix quality issues, which emerged as a big concern for the hotel aggregator after it scaled up its inventory indiscriminately over the past two years while fighting competitors.