Oyo's revenue surges 4 times to $951 million in FY19, but loss widens too

Oyo Hotels & Homes on Monday reported over 4x increase in revenue for the financial year ended March 2019 to $951 million, while consolidated losses widened to $335 million because of expansion to overseas markets, said the home-grown hotel chain. 

“The inherent costs of establishing new markets, including those related to talent, market-entry, operational expenses, among others, resulted in an increase in Oyo’s net-loss percentage in the near-term,” it said in a statement. 

However, in a call with reporters on Monday, Rohit Kapoor, India and South Asia chief executive officer, said the firm is focused on executing a ‘clear path’ towards becoming profitable. 

The SoftBank-backed firm has been reported to have been in the process of laying off close to 2,000 employees as it shifts focus towards profitability. 

In the recent past, the Gurugram-based company has come under fire for its business practices and the way it has been expanding in markets such as the US and Japan. 

“At about an employee base of 12,000, we have laid off between 15 per cent and 20 per cent of the employee base in an exercise that took place between January and February 2020,” said Kapoor, adding it was a ‘one-time exercise’.

 The company’s gross margin in India increased from to 14.7 per cent in 2018-19 (FY19), from 10.6 per cent a year ago. 

The pressure on SoftBank portfolio companies to show profitability has increased after co-sharing workspace company WeWork made a failed attempt to go public last August, after its high valuation was questioned by the market, as well its optimistic expansion plans. 

SoftBank’s Vision Fund has, so far, invested about $1.5 billion in Oyo, which is now believed to be valued at $10 billion. Among Oyo’s other investors are Airbnb, Inc., Sequoia Capital, and Lightspeed Venture Partners.

In FY19, Oyo also said business operations in India contributed to nearly $604 million of the overall revenue — a 2.9x annual growth. About $348 million was contributed by the company’s operations outside India, primarily China. 

China is also Oyo’s largest market outside India, and the recent novel coronavirus outbreak is something the company is ‘tracking on a day-to-day basis,’ said Kapoor. 

“Our key priority is that our employees and staff are safe... There will be impact in the short term, (but) it is too early to comment. Bookings have, of course, gone down,” he added. 

Ghosh added that the China market remains a priority among international markets, even as Oyo has established a presence in the US, the UK, Latin America, and Southeast Asia. 

In response to its business expansion in Japan, which was reported to have got off to a rough start, he said the geography had recorded elevenfold annualised growth in eight months, with an annualised revenue run rate of $95 million.