Oyo Generates Net Loss of $335M in FY19

Indian lodging startup and SoftBank Group Corp. supported Oyo Hotels & Homes faced larger losses in the year to March 2019, as its aggressive expansion in China and other new markets called for heavy investments.

Oyo revealed on Monday that its consolidated net loss after tax rose to $335 million in the year ending March 31. This was a sixfold increase from the $52 million loss registered in fiscal year 2018.

Consolidated revenue for the same period climbed to $951 million from $211 million a year earlier.

The news came days after SoftBank, who owns around 46% of the firm, released disappointing quarterly figures, and weeks after the Gurugram-based group started dismissing about 2,000 employees in India.

The Japanese tech giant came close to a profit wipe out after its $100 billion Vision Fund generated an operating loss ¥225 billion ($2.05 billion) during the October-December quarter, months after its bailout of US shared office space provider WeWork.

Oyo’s Aggressive Expansion

Latest losses of the six-year old Oyo were mainly led by its aggressive expansion into China and other international markets during the 2018-2019 financial year.

Since China and other international markets were in development and investment mode that time, they contributed to 75% of the losses, according to the firm, although its gross margin in India surged year-over-year.

While consistently improving operating economics in mature markets like India where it’s already seeing an improvement in gross margins, the company is determined to bring in the same fiscal discipline in emerging markets in the coming financial year, the startup said.

The hotel chain has come under scrutiny in recent months, with some analysts describing its manner of expansion to be unsustainable. Its rapid expansion has also stirred controversy following SoftBank’s portfolio firm, WeWork, collapsed after an IPO attempt.

Oyo launched its services in China in 2018 and the country has now become its second biggest market after its home market.

These markets constituted 36.5% of the global revenues, according to the startup.

The Indian company has also entered Europe and the US in 2019, while its partnership with SoftBank allowed it to access the Japanese market.

Executives of the firm have acknowledged that the lodging group grew too fast and is facing several teething issues. It has laid off at least 3,000 employees in India during the last three months.

Aditya Ghosh, who acted as chief executive of the startup and now a member of the board, stated that since entering several markets in 2019 the company was in the growth phase and that needed some investments.

Talking particularly of China, Ghosh said Oyo, like many others, is monitoring the coronavirus epidemic that has caused a shutdown on some hotels. He also added that the group is not planning to enter more markets for now.