OYO net loss widens to USD 335 mn in 2018-19

Hospitality firm OYO Hotels & Homes on Monday reported widening of its consolidated net loss to USD 335 million (over Rs 2,390 crore) for the financial year ended March 2019, mainly on account of international expansion during the period.

The company had reported a net loss of USD 52 million (over Rs 370 crore) for the previous financial year, OYO said in a statement.

Its consolidated revenue for 2018-19 stood at USD 951 million (over Rs 6,785 crore) as against USD 211 million (over Rs 1,500 crore) in the year-ago fiscal, it added.

"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, which grew from 25 per cent in 2017-18 to 35 per cent of revenue in 2018-19, to USD 335 million," the company said.

At the same time, in mature markets like India, the company reduced its losses from 24 per cent to 14 per cent of revenue in 2018-19 to USD 83 million, it added.

The business operations in India, a mature market for the company, contributed nearly 63.5 per cent or USD 604 million to the total revenue as the business clocked a 2.9 times growth y-o-y in the home market, OYO said.

Nearly 36.5 per cent or USD 348 million was contributed by the company's operations outside India, primarily China, signifying its strong commitment towards building a sustainable global business at scale with improved operating efficiencies, it added.

"As we work towards consistently improving our financial performance, ensuring strong yet sustainable growth, high operational and service excellence and a clear path to profitability will be key to our approach in 2020 and beyond," OYO Hotels & Homes Global CFO Abhishek Gupta said.

The company's increased focus on corporate governance and building a high-performing and employee-first work culture will also drive this next phase of sustainable growth, he added.

"Since China and other international markets were in development and investment mode during that time, they contributed to 75 per cent of the losses for FY19. These markets constituted 36.5 per cent of the global revenues," OYO said.

While consistently improving operating economics in mature markets like India where it is already seeing an improvement in gross margins, the company is determined to bring in the same fiscal discipline in emerging markets over the coming financial year, it added.

"The company's gross margin in India increased from 10.6 per cent in 2017-18 to 14.7 per cent in 2018-19 indicating the strength of its business model and a positive correlation between market share and economics," OYO said.

The fiscal year 2018-19 marked OYO's transition from an India-centric business to a global organisation, it added.

However, as the company recorded a brisk growth in India and international markets in 2018-19, the period also witnessed layoffs to the tune of over 2,000 employees in India.

"At about an employee base of 12,000 people, we have laid off between 15 to 20 per cent of the employee base in the exercise that took place between January and February 2020," OYO India & South Asia business CEO Rohit Kapoor told reporters during a conference call.

It was a one-time exercise. Now, the company wants to focus on the year ahead, he added.