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SoftBank-backed OYO widens FY19 losses on five-fold jump in expenses

SoftBank-backed OYO widens FY19 losses on five-fold jump in expenses
Photo Credit: VCCircle

Oravel Stays, the Gurugram-based company that owns hospitality brand OYO, saw its expenses increase five-fold during the financial year 2018-2019, leading to significantly higher losses.

Losses for the year stood at Rs Rs 2,385 crore against Rs 360 crore in the previous year. During the same period, the company reported expenses at Rs 9,028 crore, a 392% jump from Rs 1,835 crore in the previous financial year, according to its latest regulatory filings.

The company’s expenses went up on account of a steep increase in operating costs, employee costs, and other expenses. During the year, operating costs rose five times to Rs 6,132 crore, consisting of almost 70% of its total costs. Staff costs too increased six-fold to Rs 1,539 crore, while other expenses increased four times to Rs 1,281 crore.

The higher expenditure is likely to be on account of its rapid expansion in China, where it launched operations in June 2018, along with other Asia Pacific countries such as Malaysia and Vietnam.

OYO claims to be the second largest chain in the country with 10,000 hotels in 320 cities.

The company was also on an acquisitions spree during the year -- service apartment company Novascotia Boutique Homes, online marketplace for wedding venues Weddingz, and technology company AblePlus Solutions.

In FY19, the company’s revenues grew more than four times to Rs 6,645 crore, the filings showed. The disclosure of its earnings was a part of the valuation exercise that the company had undertaken a $1.5 billion fund infusion from existing investor SoftBank Group Corp and founder Ritesh Agarwal’s RA Hospitality.

Although OYO is yet to disclose its detailed financial results, those given to the independent valuer are provisional in nature, multiple media reports said.

As on June 2019, OYO had 10 lakh rooms globally with a realised revenue run rate of $2.8 billion, according to the filing.        

Founded by Agarwal, one of India’s youngest entrepreneurs, in 2013, OYO was initially launched as an online platform that aggregated rooms in budget hotels. Eventually, it transitioned into a lease and franchise-based hotel chain. OYO has also launched non-core products such as coliving and food delivery and cloud kitchens. Other than Indian subcontinent, OYO has operations in the US, UK, China, Japan, Malaysia, Middle East and Europe.

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