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Startups

SoftBank-backed OYO to cut 500 jobs in India

Layoffs come as hotel startup's Japanese investor shifts focus to profits

Oyo claims to be the world's second-largest hotel operator with a portfolio of more than 12 million rooms across 80 countries. (Photo by Akira Kodaka)

NEW DELHI -- SoftBank-backed hospitality chain OYO has become the latest Indian startup after Paytm and Ola to retrench its workforce, saying that 500 staffers will lose their jobs.

OYO is in the process of raising $1.5 billion in a primary capital infusion from its largest investor, the SoftBank Vision Fund, and RA Hospitality. The round is expected to value the Ritesh Agarwal-backed company at about $10 billion.

An OYO spokesperson said 500 will be laid off, contradicting a report by The Economic Times that indicated as many as 2,000 people will be retrenched from divisions such as sales, supply and operations.

"To ensure [its] meritocracy-based performance evaluation programme thrives, OYO continuously tracks performances of the individuals and depending on the results and the individual's interests, we may replace some candidates after giving them the opportunity to go through a performance improvement program," an OYO spokesperson told DealStreetAsia.

The Economic Times report said that most of the affected employees draw average annual salaries of 1 million rupees ($14,000) to 1.2 million rupees and have a month's notice.

OYO reportedly has around 10,000 to 12,000 employees on its payroll.

"Business has been hampered amid rising discontent among owners," the report said, quoting an unidentified source. OYO had recently faced flak from a number of hotel owners across India including over fee increases, mismanagement of contracts and arbitrary charges.

The layoffs are also being seen as a change in the strategy of Japanese technology and investment firm SoftBank Group. After marking enormous losses on investments in Uber and WeWork, SoftBank has reportedly asked its portfolio companies, including those in India, to focus on profitability and stop chasing growth, as it struggles to raise funds for its second Vision Fund.

SoftBank has to date invested nearly $1 billion in OYO, which is seen to have expanded too fast by launching in multiple countries in the past year and spending hundreds of millions of dollars buying hotel companies.

OYO's losses widened more than six-fold to 23.8 billion rupees during the financial year ended March 2019, even as revenues rose over fourfold during the period. A majority of the company's expenses are attributed to operational expenses, which escalated to 61.3 billion rupees in fiscal 2019, a fivefold increase from a year ago.

The company recently announced the appointment of Rohit Kapoor as its new CEO for India and South Asia. Kapoor replaced Aditya Ghosh, who has joined the company's board of directors.

OYO operates in 800 cities in 80 countries, including the U.S., China, Europe, the UK, Malaysia, Middle East, Indonesia and Japan. The company counts India and China among its largest markets.

DealStreetAsia is a financial news site based in Singapore focused on corporate investment activity in Southeast Asia and India. Nikkei recently acquired a majority stake in the company.

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