Oravel Stays, the holding company of budget hotel chain OYO, has raised $807 million in a growth round from Tokyo headquartered Softbank and RA Hospitality. The infusion comes at a time when the company’s China operations have stagnated amid the COVID-19 pandemic.
Of the total, Softbank has infused $507 million in OYO while the remainder came in from RA Hospitality, an investment vehicle of OYO founder Ritesh Agarwal.
The funding round is part of the $1.5 billion infusion announced in November 2019.
The company has issued 15,325 Series F preference shares at $52,643.22 per share to SVF India Holdings, a Cayman Islands-based entity owned by Softbank and RA Hospitality, regulatory filings showed.
Oravel Stays issued the shares at a 15.6% premium compared to the fair value market price by an independent valuer. As of June 30, 2019, the company’s Series F preference shares were valued at $45,540.93 per share.
In December 2019, Oravel Stays raised $665 million from Softbank and Ritesh Agarwal, according to separate regulatory filings. At the time, the company issued 13,169 shares at $52,643.22 per share.
In November same year, Oravel Stays’ board had approved raising $1.5 billion from Ritesh Agarwal and SoftBank.
The funding comes at the time when the company is facing multiple troubles in China, especially by the COVID-19 crisis. Even before the pandemic, the company was already in the process of culling more than half of its 6,000-strong workforce in China after it faced opposition from the hotel owners over guaranteed revenue scheme and other clauses, The Financial Times reported.
At the time, OYO said that the layoffs in China were a part of the global restructuring exercise announced in January.
The company, founded in 2012, made an aggressive entry in China in 2018, launching operations in 338 cities and over 590,000 rooms in a short span of time.
In the financial year 2018-19, OYO widened losses six-fold which stood at $335 million as against $52 million a year earlier. Revenues were at $951 million compared to $211 million in the previous year. The company attributed its losses to the global expansion of the budget hospitality chain, notably in markets such as China.
Apart from SoftBank, which owns nearly 50% stake in OYO, other investors include Greenoaks Capital, Lightspeed Venture Partners, Sequoia Capital India and Airbnb.
OYO also did a reorganisation exercise at its top executive level by elevating its then India and South Asia CEO and former IndiGo president Aditya Ghosh to its board. The former head of OYO’s new real estate business, Rohit Kapoor, filled in the India and South Asia CEO position. Last month, the company appointed Vijay Ghadge as the chief business officer of its frontier business, India South Asia.