Oyo Still Has $1 Billion in Cash - Despite Challenges

Oyo, the Indian hospitality company, has experienced significant challenges due to the coronavirus pandemic, but the company’s leadership asserts it possesses sufficient financial resources to navigate the current difficulties and pursue additional funding for future expansion.

During a recent company-wide meeting, Oyo’s founder, Ritesh Agarwal, stated that the lodging firm maintains approximately $1 billion in cash reserves across its various entities and joint ventures, and is carefully monitoring its financial position.

“We have also been diligent in ensuring we can effectively respond to this crisis and position ourselves for recovery when the time is right,” Agarwal explained during a discussion with Rohit Kapoor, CEO of Oyo India and SA, and Troy Alstead, a board member and former CEO of Starbucks.

This announcement should provide considerable reassurance to Oyo’s workforce and hotel partners, following the elimination or furlough of over 5,000 positions earlier this year and reports indicating a greater than 50% decline in revenue and demand due to the pandemic.

Oyo previously announced a loss of $335 million on global revenue of $951 million for the fiscal year ending March 31, 2019, and has since committed to reducing operational expenses.

Agarwal expressed optimism regarding the company’s recovery, noting that as countries ease lockdown restrictions and with promising developments in vaccine trials, he anticipates a strong rebound in the travel and hospitality sectors.

“Globally, we have managed to reach approximately 85% of our pre-COVID gross margin levels. Achieving this was exceptionally challenging, but it was made possible by the dedication of our teams in all regions,” he said, highlighting the importance of Oyo Vacation in recent months, with its hotels and holiday homes operating at high occupancy.

A transcript of the conversation, shared with employees and reviewed by TechCrunch, revealed discussions about preparing Oyo – which was last valued at $10 billion during a $1.5 billion funding round last year – for a potential initial public offering (IPO). However, Agarwal did not specify a timeframe for the IPO and suggested it is not an immediate priority.

“It is critically important to me that our teams understand the full commitment of myself, the board, and the broader management to creating long-term wealth for our OYOpreneurs – wealth that extends beyond compensation and includes the potential growth of your stock holdings.”

“Ultimately, the decision regarding the optimal timing for an IPO rests with the board. From a management perspective, we will focus on building a company prepared for public offering, taking into account factors such as market conditions and external opportunities, which the board will then evaluate to determine a potential timeline,” he stated.

Alstead shared Agarwal’s positive outlook, commenting, “Oyo’s combination of hotels, homes, and vacation rentals is distinctive within the industry. While this diverse portfolio can sometimes make external assessment and comparison more complex, it also contributes to Oyo’s resilience and balance, providing multiple avenues for growth and the ability to meet diverse customer needs.”

“This also fosters healthy interactions with property owners and partners, offering them varied opportunities based on their asset type, alongside access to a technology platform and ongoing investment in innovation for customers. In my opinion, this balanced portfolio, coupled with a strong technology platform and a customer-centric approach, positions Oyo for continued success.”