16 highlights
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The company’s return on net worth is a negative 99.7%. OYO has a gearing ratio of 45.7%, a ratio typically calculated to check whether companies will be comfortable paying back the debt they have raised. OYO’s 45.7% is not good. Especially when you don’t have a lot of cash that can be clawed back from profits.
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Early investors, venture capital firms such as Sequoia Capital and Lightspeed, have already cashed out, making millions of dollars in returns. Left on the cap table is Masayoshi Son’s SoftBank Vision Fund Holdings (Cayman) Ltd, with a 46.62% stake; it has decided to call itself “investor promoter” for the purpose of the public listing. SoftBank plays no operational role in the company on paper, but in reality controls every dollar OYO makes, spends or raises.
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Most of the remaining equity is held by Ritesh Agarwal—8.21% in his name and 24.94% through RA Hospitality Holdings, a non-transparent entity in the Cayman Islands.
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For a company that has for the longest time touted itself as the largest hotel chain in the world, a narrative pushed by Agarwal and all of his investors, the OYO that has finally landed has nothing of the “largest” or “standardization of rooms” story.
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The company is nothing short of a dumpster fire asking for permission to tap the public markets, in the hope that somehow this will be the rescue act and lead to its misadventures being forgotten.
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Is OYO really the poster child of Indian internet entrepreneurship that we’ve celebrated for so long? What exactly is unicorn-worthy in this whole endeavour after spending Rs 20,000 crore? What world-beating company was created here? Are we really celebrating a company whose only claim to fame has been its ability to raise capital? Where is the proof of a sustainable business model, which is the most elementary foundation of any enterprise?
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COVID-19 put a stop to all travel and flatlined the business of almost every travel and hospitality company. You’d imagine this story to be true for OYO too, which is in the business of catering to travellers looking for hotel rooms. You would be wrong. COVID-19 actually saved OYO.
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By January 2020, it was clear to the company that if it did not get its house in order, things were going to get really difficult. That’s when OYO embarked on a restructuring exercise
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This massive restructuring exercise and COVID-19 is how OYO cut its losses.
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This is important. Because it is not like OYO has figured out a business model where it can make money. To come to the public markets and show some semblance of sanity, it chopped off a chunk of its businesses and people and would now have you believe that what’s left is actually good. There is no proof of this.
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For years, Agarwal and his company spent all of their time, money and energy in building out the self-operated business—where the actual hotels would be managed entirely by their owners, franchisees of the OYO brand. They said it is crucial to do that because it can standardize the level of service across budget hotel properties. Remember, that was the key pain point on which the whole idea of OYO was built.
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That is out of the window now, all of it, and what you are left with is a company that basically books hotels and vacation homes.
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OYO’s DRHP is mysteriously silent on income from outside India. This is important because, last year, OYO entirely exited the Chinese market and also mostly got out of the US market
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OYO is recognizing OYO discounts as revenue. You can’t have a more blatant example of a company massaging its numbers to make them look better than they actually are.
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it begs the question: where did the company spend the remaining part of the $500 million loan? What does it mean when OYO says that the money was used for “corporate purposes”?
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After all, murky dealings (this writer has documented them extensively) and bait-and-switch are the founding principles on which Agarwal has built his company. Eight years in, his ambition of what “On Your Own” would mean for the world now lies in tatters. He is too smart to not see it.