Geopolitical impact to emerge as big risk for firms: OYO's Ritesh Agarwal

The Covid-19 pandemic has wreaked havoc on businesses, especially in the area of transportation and travel and hospitality

At a time when Sino-India tensions have increased, resulting in the ban on Chinese apps, “geopolitical impact” is going to become one of the big risks for companies that are global, said Ritesh Agarwal, founder and chief executive officer of OYO Hotels and Homes.
 
His comments come in the backdrop of the recent changes in foreign direct investment (FDI) norms on inflows from China, which have started impacting Indian unicorns and their Chinese investors.
 
“There are various countries across the world that are enacting policies, where over time companies are being seen as diplomatic enablers and not just as big businesses,” said Agarwal. “Given that, I think our policy has been to be globally local. If you travel around (the world) you will see OYO experiences look different if you’re in London (or) in Denmark, but the technology layer is the same.”
 
Agarwal said this during a conversation with Hero Enterprise’s Chairman Sunil Kant Munjal at an All India Management Association (AIMA) event. Ride-hailing firm Ola’s Cofounder and CEO Bhavish Aggarwal was also present.
 
Gurugram-based OYO, which was last valued at about $10 billion, had expanded to markets such as China, Japan, the US, Latin America and Europe. “We bring jobs and more opportunities for people but we are watching the situation very closely,” said Ritesh Agarwal.
 
Recently, Ant Group, the payment and the finance-focused company of the Chinese e-commerce giant Alibaba, said in its initial public offering (IPO) prospectus at the Hong Kong stock exchange that a change in foreign investment regulation in India led to “further evaluation” of the timing of its additional investment in food delivery start-up Zomato.

 
“I fully agree with what Ritesh (Agarwal) said, companies, especially internet-based (firms), are increasingly (becoming) very important in the future geopolitical situations,” said Ola’s Bhavish Aggarwal. “Indian companies are very well respected. That has been a big focus for us across our businesses, how can we globalise faster.”
 
Covid-19 has wreaked havoc on businesses, especially those focused on transportation and hospitality. In the pre-Covid world, OYO was going after big markets, but after Covid spread the company is investing more on processes and technology. It is doubling down in geographies where it has been doing well, including India, Southeast Asia and Europe.
 
“In geographies like China and the US which are strategic, we will continue to serve our technologies and gain market share through that,” said Agarwal.
 
Bhavish Aggarwal of Ola said Covid-19 had forced everybody to “rethink future plans and business models”. Ola, which was last valued at around $6 billion, was serving over 250 cities across India, Australia, New Zealand, and the UK.

 
“Covid has thrown up more opportunities than constraints, especially if you look at the longer-term horizon,” Bhavish Aggarwal said. People will need to move around and ship goods, but he said the challenge is building confidence among consumers about a hygienic and safer mobility solutions. He said ultimately public transport will give way to either shared or personal mobility. “That’s our strategy, where we are investing and I am personally very optimistic.”
 
Ritesh Agarwal of OYO said that as more people are working from home, vacation travel has rapidly increased. Corporate travel related to small and medium businesses is also expected to increase. He said small hotel owners need a platform like OYO more than ever.
 
“We agree that we are very significantly impacted,” Ritesh Agarwal said. “We were growing at 300 per cent, but (now) if we grow 50 to 100 per cent, that’s fine.”
 
Occupancy levels are around 40 per cent below pre-Covid levels in India. The company is witnessing good results in other markets, where it is seeing a rise in demand for vacation homes.
 
Ola and OYO are both backed by SoftBank. As Coronavirus continued to pound the hospitality industry, OYO announced lay-offs and pay cuts for thousands of employees. In May, Ola fired 1,400 employees, or over 33 per cent of its workforce.
 
“We had to make some cuts. We made sure our people have the right kind of support system even after they’re either furloughed or (laid-off) like providing insurance and health benefits. We made sure it is as humane as possible,” said Ola’s Aggarwal.