Business Today
Loading...

Oyo's Vulnerabilities

With sharp cuts in staff strength in two of its major markets - India and China - and across the world and withdrawal from one-third of 600-odd cities in India, Oyo has had to take some tough calls that have exposed its vulnerability
twitter-logoRajeev Dubey | Print Edition: March 8, 2020
Oyo's Vulnerabilities
Business Today Editor Rajeev Dubey

Entrepreneurship and entrepreneurs must be celebrated unquestionably. Their vibrancy keeps the lifelines of economies alive. Their highs and lows must be carefully choreographed for future generations to learn. Equally, their missteps must be minutely examined and their break points, ideally put under the microsope. At Oyo - founded as recently as 2013 - this and more is at work as the insanely fast-growing hotel chain goes through some harsh reality checks. Growth versus service quality; adversarial versus collaborative business partners; exploitative versus objective policies; and profitability versus expansion are just some of the glaring questions confronting founder Ritesh Agarwal and his team as the firm takes a breather and scales down its lofty ambitions and stiff goals. With sharp cuts in staff strength in two of its major markets - India and China - and across the world and withdrawal from one-third of 600-odd cities in India, Oyo has had to take some tough calls that have exposed its vulnerability.

How Agarwal deals with this crisis will test his mettle as a leader. It will also decide whether he can take Oyo to the next level of growth and quality. Or, the biggest shareholder SoftBank will strike back to sideline the founder, just as in WeWork. Manu Kaushik takes you through the minutest of details of why Oyo finds itself at crossroads today on 'Mystery of the Oyo Rooms'.

Meanwhile, three years since N. Chandrasekaran took charge as chairman, Tata Group is burdened under a debt pile. As group firms negotiated a debilitating slowdown right after Tatas' costly global acquisitions, they faced the ground reality of very high debt and low earnings. Just the top 11 companies of the 100-plus companies conglomerate have notched up Rs 2.46 lakh crore in gross debt and Rs 1.39 lakh crore in net debt.

This would not be a problem if these firms were rolling in cash or highly profitable. But these 11 firms together reported a net loss of Rs 14,765 crore in FY19. In comparison, other debt-laden groups such as Reliance Industries also have massive debt piles, but it reported a net profit of Rs 33,006 crore in the first nine months of this financial year. Similarly, JSW Steel has a net debt of Rs 49,500 crore but it also had a net profit of Rs 8,259 crore in FY19 (Read Nevin John's story 'Tata Group's Debt Threat').

These days, no discussion or meeting is complete without the threat of Coronavirus dropping into the conversation. Since India imports goods worth over $70 billion from China annually, several sectors such as automobiles, consumer electronics, pharma, gems & jewellery are heavily dependent on components from China. Chinese firms such as MG Motor, Great Wall Motors, Oppo and Vivo are even more dependent on supplies from the home country. With China less than transparent about the spread or impact of the deadly virus, should Indian businesses be worried about the coming supply constraints?

Team BT spoke to scores of industry leaders to conclude that it's a touch-and-go situation and no eventuality must be off the table. Even as alternate supply lines are being activated, factories have begun cranking up in places as far and wide as Taiwan, Thailand, Vietnam and Korea.

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close