India’s Oyo has been one of the worst impacted startups with the coronavirus, but it has enough cash to steer through the pandemic and then look at funding further scale, a top executive says.
In a town hall with employees last week, Oyo founder Ritesh Agarwal said the budget lodging firm “continued to hold on to close to a billion dollars of cash” across its group companies and joint venture firms and has “tracked to runway very closely.”
“At the same time, we've been very disciplined in making sure that we can respond to the crisis in a good way to try and ensure that we can come out of it at the right time,” he said in a fireside chat with Rohit Kapoor, chief executive of Oyo India and SA, and Troy Alstead, a board member who previously served as the chief executive officer of Starbucks.
The revelation will deliver a huge reassurance to employees and hotel partners of Oyo, which eliminated or furloughed more than 5,000 jobs earlier this year and reported in April that the pandemic had cut its revenue and demand by more than 50%.
Oyo also reported a loss of $335 million on $951 million revenue globally for the financial year ending March 31, 2019, and earlier this year pledged to cut down on its spending.
Agarwal said the startup is recovering from the pandemic as nations relax their lockdowns, and with recent progress with vaccine trials, he is hopeful that the travel and hospitality industries will bounce back strongly.
"Together globally, we were able to get to around 85% of the gross margin dollars of our pre-COVID levels. This I can tell you was extremely hard. But in my view was probably only possible because of the efforts of our teams in each one of the geographies," he said, adding that Oyo Vacation has proven critical to the business in recent months delivering "packed" hotels and holiday homes.
During the conversation, a transcript of which was shared with employees and obtained by TechCrunch, Agarwal was heard talking about making Oyo -- which was privately valued at $10 billion last year when it was in the process of raising $1.5 billion -- ready for IPO. He, however, did not share a timeline on when the SoftBank-backed startup plans to go public and hinted that it’s perhaps not in the immediate future.
“And last but not the least, for me, it is very critical. I want the groups to know that I, our board and our broader management are fully committed to making sure that long-term wealth creation for our OYOpreneurs -- beyond that of just the compensation, but the wealth creation by means of your stocks can be substantially grown.”
“At the end of the day, what is the right time to go out is frankly a decision of the board to make and from the management side, we'll be ready to make sure that we build a company that is ready to go public. And we will look at various things like that of the market situation, opportunities outside and so on, that the board will consider and then potentially help advise on the timeline,” he said.
Alstead echoed Agarwal’s optimism, adding, “I think that OYO is made up of a combination of assets, its hotels, its homes, its vacation homes. That's unique, I think in the industry in the category, I think it makes it probably a little more challenging sometimes for people externally to measure and compare and benchmark a unique portfolio company like this. But I'd also tell you, I think that makes OYO resilient. It makes OYO balanced for the future. It gives OYO several sorts of vertical opportunities to address both customer needs at any time, whether it be a hotel or a small hotel or a vacation home.”
“And it also gives opportunities and expands that interaction in a good healthy way with the property owners, with the partners, who have an opportunity depending on what asset type they have partnered with OYO in different ways, and also to have the access to a technology platform and a continued investment in that innovative platform for customers. So all those things, I think a balanced portfolio, a technology platform, a heavy focus on putting the customer first, putting the business partner first -- all those things, in my view, are what positioned OYO for the future.”