Hospitality unicorn Oyo (Oravel Stays Pvt. Ltd) on Wednesday announced salary cuts and furloughed some of its staff in India, to save cash after its revenues plunged due of the covid-19 pandemic.
In an email to employees, Rohit Kapoor, chief executive officer of Oyo India and South Asia, said that the fixed compensation of the company’s India employees will reduce by 25%. Employees who earn less than ₹500,000 per annum will not be affected by the cuts.
Kapoor also said that “some” Oyo employees will be furloughed for four months starting 4 May. “Those going on this leave will avail benefits such as continuation of medical insurance and parental insurance, school fee reimbursement and ex-gratia support […] in case of an unforseen medical emergency we will support beyond the insured amounts, if the need so arises,” he said in the email.
In an email to Mint, Kapoor confirmed the developments but declined to say how many employees have been put on furlough. He reiterated the earlier commitment made by Oyo founder Ritesh Agarwal to refrain from cutting jobs.
“Oyo is taking all necessary actions, like reduce controllable costs, voluntary salary cuts accepted by leaders, and more, to mitigate covid-19’s impact and ensure long-term success and sustenance of the business while ensuring there are no job cuts in India, despite the economic pressures,” Kapoor said.
Kapoor also warned that while the company’s steps have delayed “any potential impact” on Oyo employees, the steps “may not be enough, as the extent and projected length of the crisis is highly unpredictable.”
Oyo’s moves to cut costs are in line with similar measures taken by hospitality companies across the world, which are worst hit by the pandemic. The hospitality giant, with its wide international footprint in 80 countries is highly vulnerable to the crisis. For the year ended March 2019, Oyo, which is backed by SoftBank, Sequoia Capital, Lightspeed and others, reported a loss of about $335 million on revenues of $951 million.
Even before the covid-19 outbreak, Oyo was facing a barrage of problems in its two biggest markets — India and China — where hotel suppliers were complaining of broken promises and delayed payments. Investors and analysts had criticized Oyo’s headlong expansion of the past three years that saw its valuation rise to $10 billion in a funding round late last year, from $850 million in September 2017.
Many have said that Oyo is overvalued and predicted that the company would be the next WeWork, another SoftBank-funded startup whose failed initial public offering last September triggered a wider reckoning for internet startups globally.
Oyo has enough cash to see out the crisis after raising $1.5 billion late last year. But the company’s $10 billion valuation is certain to plunge, analysts say.
The news of salary cuts at Oyo’s India operations comes just a week after the company started placing thousands of employees in the US and other international markets on furloughs or temporary leaves.
Earlier this year, Oyo had cut more than 5,000 jobs in India and other markets. After the cuts, the company still had a workforce of 25,000.
This article was first published on livemint.com