The country’s largest budget hotel chain Oyo Rooms is reportedly close to sealing a new funding round of around $250 million led by its existing investor SoftBank, at a valuation of $850 million, according to a Times of India report quoting sources.
According to earlier news reports, the budget hotel aggregator was in talks with SoftBank to raise a $500 million round of financing at a valuation of $1.2 billion.
The latest report suggests that the early investors in Oyo opposed the $500-million proposed funding by SoftBank as it would have diluted their shareholding and given more than 50 per cent control to the Japanese investor.
“Seeing what has played out at Snapdeal, many early investors are wary of SoftBank taking large ownerships in their portfolio companies. But Oyo hasn’t been able to shore up capital from external investors, which is why they have opted for half of what was committed by SoftBank,” said one of the sources cited in the report.
Through the new funding round, SoftBank will increase its stake in Oyo to over 42 per cent compared to 27 per cent now, making it the majority shareholder of the company. SoftBank has so far invested about $120 million in the company across two funding rounds in 2015 and 2016.
The valuation of about $850 million would be a significant jump from when the company was valued at $460 million when it last raised about $62 million in August 2016.
The funding will help provide a push to Oyo’s expansion plans, a large of which will be invested into Oyo’s new offering, Townhouse (earlier called Flagship), which leases properties and services them for better quality experience in a move to fix quality issues. It will also help the company to boost its international expansion plans.