Hospitality startup Oyo is bullish on its Townhouse chain and plans to double down on the properties in this vertical in 2019. The money to support the aggressive expansion plan may come from venture debts. This is right after it pocketed the big USD 1 billion round.
Launched in January 2017, Oyo Townhouse is positioned as “friendly neighborhood hotel” targeted at millennials. Led by Ritesh Agarwal, Oyo now operates 88 Townhouse properties, and is planning to add up to 500 this year. It is in talks with several debt firms and private banks to raise several hundreds of crores in debt financing, reported Mint, citing three people familiar with the matter.
As an anonymous venture debt investor explained to Mint, “When they started with the marketplace, they didn’t need any leverage at that point. But once they got into Townhouse, there was a need for investing into the properties, which made them turn to debt financing."
Oyo is not alone in seeking the venture debt route of fundraising. Top players like Swiggy, BigBasket and Byju’s have also turned to debt regardless of flushing-in equity funding.
Acquisition of coworking space Innov8 ‘finalised’
Oyo is also also eyeing the co-working spaces industry.
Economic Times had reported in January this year that Softbank-backed Oyo was in advanced talks to acquire Singapore-headquartered co-working space provider Innov8. Another sources from Oyo told Business Standard that the acquisition is finalized. Oyo reportedly plans on a deal between USD 21.7 million and USD 28.9 million from its USD 1.1 billion balance sheet.
Innov8, founded in 2015, currently has presence in four cities – Mumbai, Bengaluru, Delhi, Noida, Gurgaon and Chandigarh – with over 13 co-working spaces and private offices for rent. It is backed by top angel investors such as Google India head Rajan Anandan, Paytm founder Vijay Shekhar Sharma and Freshworks chief executive Girish Mathrubootham.
Innov8 secured USD 4 million in pre-series A round led by Credence Family Office in October 2018.
After the acquisition, Innov8 will continue as a separate brand, remaining part of Oyo’s plan to become a full stack real estate leasing company. Oyo aims to open 35 new co-working spaces in major cities next year and has already launched two co-working brands – PowerStation and WorkFlo, Business Standard reported.
Similar to the budget-friendly strategy of its hotel operation, Oyo’s co-working space plan also sells on affordability, though its two brands will cater to different and varied needs. PowerStation offers “managed workspaces” for clients who have a growing team size and will be mainly set in emerging business districts. WorkFlo targets the smaller scale, providing affordable options for regional offices, sales and customer services centres and growing startups.
In the co-working spaces sector Oyo faces competition from WeWork, a SoftBank portfolio company. WeWork has set up 287 centres in 77 cities and 23 countries. Other competitors are RMZ Group-promoted CoWork, and smaller players such as Awfis, BHive and 91Springboard.
Innov8 will be the fourth acquisition for Oyo, after wedding marketplace Weddingz, IoT technology company AblePlus and executive stays Novascotia Boutique Homes (now known as OYO SilverKey).
OYO Hotels and Homes are currently present in 10 countries across over 500 cities, with 18,000 hotels and homes.