SoftBank-backed OYO in advanced talks to acquire LPU’s hostel assets

Oyo Rooms in Bangalore. Photo: Booking.com

Indian hospitality company Oyo Hotels and Homes (OYO) is in advanced discussions to acquire hostel assets of Lovely Professional University (LPU) for about $200 million, as it eyes leadership position in the fast-growing student accommodation space, The Times of India reported.

Located 20km from Jalandhar in Punjab, LPU campus boasts of a residential capacity for about 25,000-30,000 students ranging from individual rooms to dormitories to apartments. The property has also attracted interest from HDFC, Goldman Sachs-backed Good Host Spaces, and global private equity major Blackstone, the report added.

The deal, the contours of which are still being finalised, may be structured as a multi-decade, long-term lease. It is expected to make SoftBank-backed OYO the largest owner of student accommodation assets in the country.

Meanwhile, LPU’s promoters, the Mittal family, are looking to generate liquidity from the asset sale, and also use proceeds for future expansion. LPU, will, however, continue to hold the rights on how much students are charged, the report said.

OYO’s new business segment, OYO Life, targets millennials and young professionals, who are looking for affordable fully managed homes. In another report in May, the hospitality chain said that it plans to take up 100,000 beds across major cities by the end of 2019 from 13,000 beds then in select cities like Delhi-NCR, Pune and Bengaluru.

Currently, the demand for purpose built student accommodation (PBSA) across India totals more than 8 million bed spaces, and it is expected to grow at a rate of around 8 per cent each year to reach 13 million beds by 2025, according to the Global Student Property 2019 Report by Knight Frank.

Around $100 million was invested into the Indian PBSA market in the year 2018. However, according to Knight Frank, the current potential demand for PBSA in the country is approximately $50 billion.

No doubt, OYO, which has already made it big in the hospitality space, is now looking to expand rapidly in the co-living, student housing and co-working segments.

OYO’s portfolio currently comprises more than 23,000 hotels and 1,25,000 vacation homes, with over one million rooms. The company also recently announced an investment of $300 million to expand its footprint in the U.S.

It also recently acquired Danamica, a Copenhagen-based data science company specialised in dynamic pricing, for an undisclosed amount.