Microsoft Backs Oyo Ahead of IPO

Microsoft Invests $5 Million in Oyo

Microsoft has made a $5 million investment in Oyo, an Indian budget hotel chain, as revealed in a recent regulatory filing. This investment validates a prior report from TechCrunch published last month.

Valuation and Recent Performance

The latest funding round establishes Oyo’s valuation at $9.6 billion. This figure is marginally lower than the $10 billion valuation implied by the startup’s previous financing in 2019.

Previously, SoftBank, a major investor, had valued the company at only $3 billion in recent quarters, reflecting the significant impact of the pandemic on its business.

Potential Cloud Services Shift and IPO Plans

Reports from TechCrunch suggest that this strategic investment could lead to Oyo adopting Microsoft’s cloud services. The company is also reportedly preparing to launch an Initial Public Offering (IPO) later this year, according to sources close to the matter.

Oyo’s Expansion and Challenges

Oyo has experienced rapid expansion, becoming one of India’s most valuable startups. Its reach extends to numerous international markets, including Southeast Asia, Europe, and the United States.

However, the company’s growth has been hampered by issues such as a “toxic culture,” governance concerns, and strained relationships with hotel owners.

Impact of the Pandemic

The onset of the COVID-19 pandemic coincided with Oyo’s efforts to improve its relationships with hotel partners. As a result, the company scaled back its expansion plans and implemented workforce reductions globally.

CEO Ritesh Agarwal described the pandemic’s impact as a “cyclone,” noting a decline of over 60% in business within just 30 days, in an interview with Bloomberg TV last month.

Financial Status and Debt Restructuring

Agarwal stated that Oyo held between $780 million and $800 million in cash reserves. The company has also reduced its monthly operating expenses to between $4 million and $5 million, down from approximately $1 billion in December 2020.

Oyo recently secured $660 million in debt financing, which was used to refinance existing debt obligations, as confirmed by an insider.

Microsoft’s Investment Portfolio in India

This investment in Oyo represents Microsoft’s continued commitment to the Indian startup ecosystem. The company has previously invested in several other prominent Indian companies, including: