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Startups

Indian hotel chain Oyo sets up venture with SoftBank

Move seen as part of company's global expansion in luxury segment

A receptionist at an OYO hotel, India's largest and fastest-growing hotel chain, waits for customers at a property in New Delhi in September 2018.    © Reuters

BANGALORE -- Gurugram-based hospitality chain Oyo Hotels & Homes -- one of the few "decacorn" (startups valued over $10 billion) companies from India -- is making quick moves, with a three-pronged strategy to consolidate its position as the world's third-largest hospitality company.

Oyo's parent company, Oravel Stays, has partnered with SoftBank Group-owned entity SB Topaz to set up two joint ventures in India: Mountainia Developers and Hospitality, and MyPreferred Transformation and Hospitality, local news outlet The Economic Times reported, citing Oravel's regulatory filings accessed by data platform Paper.vc.

While Mountainia Developers acquires real estate, including empty land and fully developed properties, MyPreferred Transformation deals with renovation and refurbishment of hotels and related assets in India. Oyo has also set up a third entity, OYO Financial and Technology Services.

"OYO is a growing company which needed certain restructuring to ensure that the best interests of the company is established. This is a routine business structuring and we have no further comments to share on the same," a company spokesperson told The Economic Times.

Six-year-old Oyo, which started out by offering budget hotels in India, has since expanded its business overseas and is on a buying spree of premium hotel properties and vacation homes. It also plans to create a global property fund to back its ambition of buying and leasing hotel properties across the world.

Founded by Ritesh Agarwal, Oyo is keen on lapping up the best in the four-star luxury hotel segment. Earlier this month, the company paid $5 million to acquire luxury hotel Fortune Select Metropolitan, run by Indian premier hotel chain ITC Hotels.

In April, U.S.-based home-sharing platform Airbnb invested $200 million in Oyo as part of its Series E round. According to media reports, it is further seeking to raise $750 million to $1 billion, with the funding expected to be led by SoftBank, which might zoom Oyo's valuation to the range of $13.5 billion to $15 billion.

The funds are likely to be used for large-scale diversification and day-to-day running of its elite properties worldwide. In the last year and half, Oyo has entered a number of international markets, including China, the Philippines and Indonesia. It claims China is already one of its largest markets, after India.

Oyo's net loss in the 2018-19 financial rose to 5.12 billion rupees ($72 million), compared with a net loss of 3.6 billion rupees in 2017-18, Aditya Ghosh, Oyo's CEO, told reporters in April.

KrASIA is a digital media company focused on technology-driven businesses and trends across the Asia-Pacific region. It is under 36Kr, a tech news portal based in Beijing. Nikkei announced a partnership with 36Kr on May 22, 2019.

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