OYO Hotels raises $1 billion from SoftBank, Lightspeed, Sequoia Capital

South Asia’s largest hotel chain OYO has raised $800 million in its latest funding round led by SoftBank Vision Fund, with participation from existing investors Lightspeed Venture Partners, Sequoia Capital and Greenoaks Capital. OYO has also received a commitment of an additional $200 million, bringing the total fundraise to $1 billion in this round, the company said in a statement on Tuesday.

“In a short span of time, OYO Hotels has grown to become the most-preferred hotel brand in both economy and mid-market segments. We have already started expanding our presence to newer segments, with OYO Home, OYO Townhouse and more recently Palette Resorts by OYO. We will continue to explore newer businesses while remaining focused on both organic and inorganic growth," said Ritesh Agarwal, founder and chief executive, OYO.

In the last 12 months, OYO has increased its international footprint to five countries - India, China, Malaysia, and Nepal, and more recently in The UK. With this additional funding, it plans to rapidly scale its business in these countries, while continuing to invest further in technology and talent.

“OYO’s unique value proposition and outstanding growth over the last few years gives us the confidence that OYO can scale, innovate and continue to offer an intuitive customer experience, curated for different markets,” said Justin Wilson, director, SoftBank Investment Advisers (SBIA).

OYO India has over 125,000 rooms and is witnessing three-fold growth in transactions year-on-year with net take rates ( Net take rate refers to the number of clicks an ad or offering gets.) over 20%.  In addition to attaining unit-level profitability, the company is benefiting from 90% demand coming from its direct channel, improving operating efficiencies while customer loyalty, with over 67% of the top line in India coming from repeat customers.

In over 10 months since its foray into the Chinese market, OYO China, has created presence in 171 cities with over 87,000 rooms. With both home markets, India and China on a steady performance trajectory, the company will continue to expand its presence globally.

The company will direct a significant part of the funds from this round of financing, nearly $600 million, into strengthening its position in China, which is still in the early stages of growth, while the rest will go into maintaining its leadership position in India and expansion into new markets.

“It's exciting to see OYO's success in scaling the India business while extending their pioneering asset light, controlled-experience model to international markets. Budget travellers are consistently short-changed by the lack of trust, quality, and consistency in this segment, and we believe that OYO will continue to disrupt the hospitality industry by building a trusted brand that delivers affordable, consistent and high-quality experiences,” said Bejul Somaia, managing director, Lightspeed India Partners Advisors.

J.P. Morgan was the exclusive financial advisor to OYO on this fundraising.

The 24-year-old Agarwal, who was a part of Fortune India’s coveted 40 Under 40 list this year, wants to ride the success of OYO as a hotel aggregator—the largest Indian budget hotel chain in terms of number of rooms—to create an asset management solutions provider.

In other words, OYO is not just aggregating or branding hotels any more, it is operating properties. In these properties, OYO’s imprint wouldn’t be restricted to ensuring the standard Wi-Fi, clean linen, and free breakfast that one finds in OYO Rooms. Rather, it will go deeper—from day-to-day running of the property to re-doing the interiors if needed. It plans to do all of this without actually owning the real estate.