Corporate Finance

This document provides an overview of OYO Rooms, India's largest hospitality company, focusing on its business model, capital structure, major competitors, and recent operating and financial performance. It also explores the acquisition of other companies by OYO Rooms. The document offers insights into the field of corporate finance.

Running head: CORPORATE FINANCE
Corporate Finance
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Table of Contents
Introduction:...............................................................................................................................2
OYO Rooms Business Models:.................................................................................................2
Capital structure of OYO Rooms:..............................................................................................4
Major competitors of OYO:.......................................................................................................5
Capital Structure of OYO Competitors:.....................................................................................6
Lemon Tree Hotels Ltd:.........................................................................................................6
Fab Hotels:.............................................................................................................................6
Treebo capital structure:.........................................................................................................7
Vista Rooms:..........................................................................................................................8
Acquisition:................................................................................................................................8
Recent Operating and Financial Performance:..........................................................................9
Sustainable Business Demand Channel:..................................................................................12
Conclusion:..............................................................................................................................12
References:...............................................................................................................................13

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Introduction:
OYO Rooms, is generally known as the OYO which is regarded as India’s largest
hospitality company that comprises of largely the budget hospitals. The company was
founded during the year 2013 by Ritesh Agarwal and ever since its establishment the business
has grown over 8,500 hotels in 230 cities of India, UAE, China, Nepal and Indonesia.
Following three months of the research and staying in more than 100 bed the owner
established a pivoted Oravel to OYO in the year 2013 (Gupta, 2018). OYO builds partnership
with the hotels to provide similar guest experience all through the cities. Shortly following
the launch of the Oravel Stays, Ritesh Agarwal received a grant of $100,000 as the part of the
Thiel Fellowship from the Peter Thiel.
OYO Rooms Business Models:
OYO Rooms asserts to be one of the branded network of budget hotels and hence
claims to be different from the other hotel aggregators and OTAs (Online Travel Agents)
namely Goibibo, Make my trip, Clear Trip and Yatra. The business model of OYO Rooms is
such that it simply connects the hotel aggregators with the guests by listing the hotels on their
website and taking up the commission as their revenue (Owler 2018). Several times the hotel
aggregators work on the deal with the hotel aggregators for a minimum order guarantee per
month and as a result they are able to offer discounted rates and deals on the rooms in
comparison to the rates that is given by the hotel to the normal guest. The business model of
OYO Rooms is such that it makes it lucrative for the guests. The business model of OYO
Rooms is that it neither owns any hotels nor it is the hotel aggregator.
OYO Rooms builds partnership with the non-standardized hotels and blocks rooms by
purchasing them for a specific period of duration. OYO later resells the room under its brands
to potential guests (Owler 2018). The business model of OYO Rooms is such that it naturally

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adds up to the operational costs and demands huge amount of working capital to the first
block the rooms. This enables the owners to understand where their money is going.
The manner in which OYO Rooms functions is different from the Online Travel
Agents (OTA) as they emphasis on the co-branding. According to reports OYO forms
partnership with the two to three star hotels and also includes the standardized guest house
and attracting customers though their website or applications. The initial marketing strategy
of OYO Rooms involved listing hotel of its properties.
During the late 2017, OYO Rooms launched an Airbnb such as marketplace for the
short term managed rentals. OYO Rooms has the presence in more than 10 leisure
destinations of India that also includes Goa, Shimla, Pondicherry, Udaipur, Kerala etc. In the
month of April 2018, Oyo launched the OYO Home in Dubai which is the first international
accommodation for the company.
Figure 1: Figure representing OYO Overview
(Source: Owler 2018)

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Capital structure of OYO Rooms:
The capital structure of OYO Rooms involves venture capital financing that is raised
from numerous sources. OYO Rooms raised a “Series A” round of funding that comprised of
$24 million from the light speed venture Partners, Sequoia Capital, Greenoaks Capital and
DSG Consumer Partners (Owler 2018). During the month of August 2015, OYO Rooms
raised another $100 million from the Softbank an existing investor. In the following year of
2016, OYO Rooms raised another $90 million from the Softbank Group, Innoven Capital and
the existing investors.
Further in the year of 2017 September, OYO Rooms announced that it had closed
down a Series D funding of $250 million that was led by Softbank Group, new investors
Hero Enterprise and Light Speed Venture Partners (Borio and Disyatat 2015). China Lodging
also made a strategic investment to OYO Rooms that amounted to $10 million during the
year 2017 in September.
The venture financing of OYO Rooms continued in the financial year of 2017 as the
company managed to raise another $1 billion during the month of September 2018. The
major part of the funding was raised from Softbank vision fund where Lightspeed also
participated with Greenoaks Capital and Sequoia which amounted to $800 million. Therefore,
major part of the capital structure for OYO Rooms is based on the Venture capital funding.
Round Funding Date Amount Investors
Series E Sep-18 $1 Billion Light Speed Venture
Series D Sep-17 $10 Million China Lodging Group Ltd
Series D Sep-17 $250 million Softbank
Series C Apr-17 $250 million Softbank
Equity Aug-16 $61.7 Million Softbank
Major competitors of OYO:
OYO faces major competitors from the following

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a. Treebo Hotels
b. Fab Hotels
c. Vista Rooms
d. Lemon Tree Hotels Ltd
OYO Rooms faces intense competition from the above stated businesses. Treebo
competes with OYO Rooms, Fab Hotels and beside this it also faces competition from Make
My Trip, Yatra and ibibo group that have also entered into the hotel industry. While
companies such as OYO rooms have continued to raise capital but with the intense
competition prevailing in the market other small companies namely Mumbai Based Instant
Hotels Around You Pvt Ltd, Stayzilla and RoomsTonite have closed down.
Furthermore, online competitors such as Make My Trip offer intense competition to
OYO Rooms as the company has more than 13,000 hotels and guest houses in India and more
than 184,000 (Gupta, 2018). Yatra.com on the other hand, partners with more than 7500
hotels and holidays packages in a day and accounts 21.17% of its revenue from the hotel
services. The business has presence on the websites and applications as well and draws more
number of customers from its website and mobile applications.
Fab Hotels is viewed as one of the biggest rivals of OYO Rooms and Vista Rooms.
The business was founded during the year 2014 in Gurgaon. Fab Hotels has more 20
employees versus Vista Rooms and OYO Rooms. Similar to Vista Rooms, OYO Rooms also
competes with the Hotels space and produces more $397 million in terms of revenue.
Another competitor that has emerged into the market of accommodation industry is the
Lemon Tree Hotels Ltd (Hoenig and Henkel 2015). The business owns more than five
thousand rooms in more than 31 cities of India until date. The lemon tree hotels are regarded

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as the largest chain of medium priced hotels in India and it is third largest overall hotels in
terms of the controlling interest and leased rooms.
Capital Structure of OYO Competitors:
Lemon Tree Hotels Ltd:
The capital structure of Lemon Tree Hotels Ltd presents the Authorized Capital,
Issued Capital and Paid-Up Equity Capital of the company over the time period.
Capital Structure of Lemon Tree Hotels Ltd
Period Instrument Authorized Capital (Rs Cr) Issued Capital Capital
From To (Rs.Cr) (Rs.Cr) Rs
2017 2018 Equity Share 1001.4 786.4 786.4
2016 2017 Equity Share 998.5 781.2 781.2
2015 2016 Equity Share 998.5 778 778
Fab Hotels:
Taking into the account the capital structure of Fab Hotel the company raised funding
of around $8 million from the Accel Partners, Qualcomm Ventures, Mohandas Pai’s Aarin
Capital and RB Investment (Manigart and Sapienza 2017). In the following year of 2017, Fab
Hotels further reported the receipt of funds that amounted to $25 million from the Series B
funding from the Goldman Sachs and Accel Partners also participated in the Series B funding
to raise capital for Fab Hotels.
Founding Date 2015
Fabhotels total
funding $35.3 million
Fabhotels latest
funding $25 million
Investors of
Fabhotels
Mohandas Pai, Accel Partners, Qualcomm Ventures, RB
Investments, Goldman Sachs

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Fab hotels Capital Raised
Figure 2: Figure illustrating Capital raised by Fab hotels
(Source: Hoenen et al. 2017)
Treebo capital structure:
Treebo one of the Hotel Aggregator has reported that the revenue of the company
multiplied by around 10 times in the revenue during the financial year of 2017, however the
company reported an increase in the net loss due to the higher instances of expenditure (Fu,
Yang and An 2018). The total amount of revenue for the company increased to $20.6 million
for the year 2016-17 representing a $2.3 million rise in from the reported period of 2015-16.
The net loss also increased by $7.5 million from the year $25.1 million.
Taking into the account the capital structure of the company the budget chain of hotel
raised the funding of $34 million from the series C funding that was led by the Hong Kong

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based investment firms namely Ward Ferry Management and Karst Peak Capital (Ghoshal
2018). The existing investors namely SAIF Partners, Matrix Partners India and Bertelsmann
India Investment also took part in the process of funding for Treebo Hotels.
During the year 2016, the company raised around $16.7 million in its Series B
funding across by the Bertelsmann India Investment, the strategic investment vehicle of
international from the international media company (Bril, Kalinina and Valebnikova 2016).
The existing investors includes the SAIF partners and Matrix Partners India also took part in
the fund raising activity. Furthermore, during the year 2016 the company further raised $6
million from the Series A funding round which was Co-led by the Matrix and SAIF.
Vista Rooms:
The capital structure of Vista rooms suggest that the Vista rooms has venture capital
structure as the company has obtained fund from the Angel Investors and equity crowd
funding. The capital structure of the company is mainly based on the equity financing and
raised $736.8K in the form of funding over one round (Cbinsights.com 2018). Being the
start-up company Vista Rooms raised 1.5 million of capital from the seeds funding.
Investors Type of Investors Participating Rounds
Rajan Anandan Angel Investor (Individual) Seed VC
Let’s Venture Equity Crowdfunding Seed VC
Girish Mathrubootham Angel Investor (Individual) Seed VC
Singapore Angel Network Angel Investor (Group) Seed VC
Artha India Ventures Venture Capital Seed VC
Acquisition:
Acquired Company Date of Acquisition Amount
Weddingz.in August 2018 Undisclosed
ABLEPLUS July 2018 Undisclosed

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Novascotia March 2018 Undisclosed
The above stated companies represents that OYO Rooms have acquired three
companies and during the year 2018 of August the company has acquired Weddingz.
Recent Operating and Financial Performance:
OYO Rooms is regarded as the largest hospitality company that is shaping the
evolution of the hotel industry in India. The innovative business model of OYO Rooms is
viewed as unique and indigenous to India and the business is looking forward to solve the
problems of small hotels through the help of rapid technological advancement and procedure
(Kandampully Zhang and Bilgihan 2015). As the business is not competing with the
international template, the company is not on certain circumstances understood well and
regularly the metrics of the business is misrepresented and cited beyond context.
During the quarter ending month of June in the year 2017, the business has observed
its highest revenue producing month with the total amount of booking value standing close to
$100 million setting up the higher watermarks for the business. The net amount of daily
realised rooms per night have increased by 30% from the quarter to quarter and 1.7 times
growth from year to year revenue (Jones, Hillier and Comfort 2016). The strong foundations
of the company have strongly laid the foundations for strong growth where the players are
representing growth in terms of consolidation. The business has growth organically with the
single mind focus of introducing the quality of living based on the correct price and locations.
The quarterly realized rooms per night and revenue have increased by more than
twelve times over the last two years. This represents the revenue that is derived from the
guest for the rooms used per night.

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Figure 3: Figure representing revenue growth of OYO Rooms
(Source: Jauhari and Bharwani 2017)
The take rate turned out to be positive from the month of March 2016 and the number
have increased significantly upwards ever since the business gained market. As the matter of
fact during last month, more than 33% of the booking value for OYO Rooms made up the net
take rate of 20% (Jauhari and Bharwani 2017). In spite of the fact that the OYO Rooms keeps
it reasonable level to assure that the its business partners make sufficient amount of money at
the end of the day representing that the partnership have scripted the business of
accommodation industry together.
OYO Rooms is growing at a faster rate and at the same time the business is making a
giant leap towards the quality of its guest experience. The company has better been able to
grow its business based on the top-line metrics. The business is keenly aware of the fact the
growth has mainly been attained at the expense of costs. For OYO Rooms, it was mainly the
long term capability creation (Peneder 2014). For the financial year of 2015, 2016 and 2017
the audited financial statements of OYO Rooms represent the growth in the number of
customers. The investments made by the business have facilitated the creation of niche set of
capabilities that results in higher base of growth in the profitability.

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The business development team of OYO Rooms specializes in converting its
properties at the correct places and selling them at the correct place. This has significantly
contributed enormously towards the growth of the business. The on-ground strength of OYO
Rooms has reflected in the number of guests per rooms and majority of the OYO Rooms
properties are running at 80% occupancy in the key business cities (Murthy 2015). The wide
shift in the network is made realistic from its partners that have been entrusted with the sole
brand and business partners for creating a value cash producing asset.
Figure 4: Figure representing growth in cash producing asset
(Source: Mason and Harrison 2017)
Sustainable Business Demand Channel:
Over the short period of time the business has achieved the scale where it becomes
tough for OYO Rooms competitors to enable sustainable business practices. Presently, OYO
Rooms is witnessing 45% of the repeat customers which is mainly because of its unified
product experience, efficient marketing and rock-solid delivery capabilities. Majority of its

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lookalikes is mainly dependent on the online travel agents that basically makes some degree
of business rationale due to the unviable economic and lower customer repeat or retention
rates (Michaels, Page and Whited 2016). OYO Rooms has created capabilities where more
than 98% of the demand is directly without the dependence on Online Travel Agents.
Conclusion:
On the conclusive note OYO Rooms ever since its establishment has gained immense
popularity. The main source of capital structure is based on the venture capital funding and
angel investors. However, OYO Rooms faces intense competition from the Treebo, Vista,
Fab Hotels, Make My Trip and Lemon Tree Hotels Ltd. A recommendations can be made for
OYO Rooms is that the business can increase more corporate tie-ups as this would further
help OYO Rooms in expanding from two tier cities to the three tier cities. The business can
strengthen its tie up with travel and tourism department to increase its operations in the
prominent states across India. Furthermore, in a step forward to strengthen its competitive
advantage OYO Rooms can tie up with the airline companies for room bookings and also
increase its expansion across Asia and Europe.

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References:
Borio, C.E. and Disyatat, P., 2015. Capital flows and the current account: Taking financing
(more) seriously.
Bril, A., Kalinina, O. and Valebnikova, O., 2016. Innovation venture financing projects in
information technology. In Internet of Things, Smart Spaces, and Next Generation Networks
and Systems (pp. 766-775). Springer, Cham.
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at: https://www.cbinsights.com/company/vista-rooms-funding [Accessed 24 Dec. 2018].
Fu, H., Yang, J. and An, Y., 2018. Contracts for venture capital financing with double-sided
moral hazard. Small Business Economics, pp.1-16.
Ghoshal, A. (2018). Treebo Hotels’ FY17 revenue soars 10-fold, loss widens. [online]
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Hoenig, D. and Henkel, J., 2015. Quality signals? The role of patents, alliances, and team
experience in venture capital financing. Research Policy, 44(5), pp.1049-1064.

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Jauhari, V. and Bharwani, S., 2017. An exploratory study of competencies required to
cocreate memorable customer experiences in the hospitality industry. In Hospitality
Marketing and Consumer Behavior (pp. 159-185). Apple Academic Press.
Jones, P., Hillier, D. and Comfort, D., 2016. Sustainability in the hospitality industry: Some
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[online] Available at: https://www.owler.com/company/oyorooms#competitors [Accessed 24
Dec. 2018].

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Owler. (2018). Vista Rooms Competitors, Revenue and Employees - Owler Company Profile.
[online] Available at: https://www.owler.com/company/vistarooms#financials [Accessed 24
Dec. 2018].
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pp.269-273.

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References:
https://www.oyorooms.com/officialoyoblog/2017/07/28/oyo-report-card-fy-2015-2017-2
https://www.owler.com/company/oyorooms#competitors
https://www.cbinsights.com/company/vista-rooms-funding
https://www.owler.com/company/vistarooms#financials
https://www.vccircle.com/treebo-hotels-losses-jump-by-192-revenue-soars-ten-fold-in-fy17