Will OYO sacrifice profitability as it competes in Southeast Asia?

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Singapore: A filing with India’s Ministry of Corporate Affairs last week revealed that burgeoning hospitality chain OYO Rooms (also known as OYO Homes & Hotels) is not expected to be profitable until 2022.

Reuters reported that the filing showed the Gurgaon-based company suffered losses that were six times higher in the financial year ending March 2019 compared to the prior year. The good news is that revenue grew more than four times and it now claims to be the world’s largest hospitality brand by room count. OYO cited its rapid expansion especially its aggressive moves into markets like China, the United States and the United Kingdom as the main reason for the losses. China is OYO’s biggest market by room count and the company says it is the country’s biggest hotel chain.

Based on the unaudited filing, OYO reported a net loss of $333 million (Rs 23.85 billion) in the fiscal year which ended 2019, compared with a loss of Rs 3.6 billion a year earlier. Operational revenue swelled to Rs 64.57 billion from about Rs 14.13 billion for the comparable period the previous year.

Softbank through its Vision Fund has invested about $1 billion in OYO and its stake in the company stands at about 50%. Poor performance of this venture capital fund was cited as the main reason for Softbank reporting its first quarterly loss in 14 years of $8.9 billion in the second quarter which ended September 2019.

Following the listing debacle of office-rental firm WeWork, Softbank is expected to be more cautious in handling OYO especially with uncertain profitability of companies it has backed like Uber and Flipkart.

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via FPJ

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