Oyo to invest $200 million in India; to focus on building capacity than profit, says CEO Ritesh Agarwal

Ritesh Agarwal-led Oyo will focus on building capacity rather than cutting down on profits for the year 2019 as the unicorn start-up reworks its strategy for India. Also, the company has no immediate plans to raise further capital after its recent $1 billion in funding from a clutch of investors. This was revealed in a letter issued by Agarwal, and co-signed by the company's South Asia CEO Aditya Ghosh, to the Oyo employees. The letter explains Oyo Hotels is now a "well capitalised" company and will focus more on the growth prospects in its home market, reported the Economic Times.

The year 2018 turned out to be a big year for hospitality start-up. It has expanded its global footprint by moving into China and the UK and is close to turning profitable. Also, the company entered the coveted unicorn club by raising $800 million from Japanese telecom major Softbank through Softbank Vision Fund. Oyo also received a $200 million funding from Singapore's ride-hailing company Grab, of which $100 million is expected to be released by December end. Now the company plans to invest around $200 million of these funds for expansion and quality improvement in India.

"Today, we are committing to invest $200 million in India, with the focus on building strong capabilities that will help us further improve the quality of customer experience in India. We will cross leverage this in other markets as well," Agarwal said.

Also read: OYO raises $1 billion from SoftBank, Sequoia and other existing investors to enter unicorn club

The letter added the company will "focus on capacity building and look at opportunities for both organic and inorganic growth as long as it helps us in this mission. Rest assured, you will have all the resources and support you need to achieve your goals, make our collective vision for 2023 a reality".

The recent shift in Oyo's strategy comes days after Aditya Ghosh joined as its India and South Asia CEO from December 1. Earlier reports said Ghosh was roped in to only focus on accelerating growth in the home markets, specifically India and China. Ghosh joins Oyo Hotels & Homes following a stint as an advisor to Tata Trusts. He had stepped down from his position as IndiGo's president and whole-time director in July.

Agarwal's letter says the company can now boast a strong balance sheet, which will help it focus on maintaining the highest quality standards. "With a strong balance sheet, we today can go more places than ever, introduce new categories, invest in our assets, while maintaining our high-quality standards, without raising any further capital," the email stated.

Reports suggest Oyo is now valued at between $4.5 and 5 billion -- in the same league as Ola, India's largest taxi-hailing service -- after the recent round of funding. In its previous round last September, when Oyo had raised about $260 million from SoftBank and other investors, it had been valued at about $850 million.

Also read: Ritesh Agarwal's OYO forays into long-term housing rentals with OYO Living

Notwithstanding the company's sound financials and its growth plans, Oyo has also been accused of violating several industry norms, including breach of contracts with hotel operators and putting consumer safety at risk. It remains to be seen how Oyo will tackle these problems amid its plans to become the largest hotel chain in the world by 2023.

Edited by Manoj Sharma