Understanding the overall Industry

• Oyo mainly earns its maximum revenue from short-term stays. Though recently the company introduced monthly rent staying, still it needs time to take the market from competitors..
• short-term staying market may increase up to $1.9 trillion by 2030. With an expected CAGR rate of 6-7%.
• Many factors drive customers to use this service and still those going to help the industry in the future. Let’s look into some of the factors,
  • Consumers are having more disposable income than before.
  • Social Media, we often see our friends, colleagues, relatives share their photos of traveling. We also end up going somewhere and using these services.
  • flights are becoming more accessible, Govt is pushing the tourism industry around the Globe.

How OYO became so big only in 7-8 years?

• OYO understood a good opportunity. If you see the data, Globally 88% of homes are unorganized.
• There is a good scope in this industry, they just need to add those homes to their website quickly. Nonetheless, you need to provide good quality services which OYO never fails to do that.

Competitors

Not only does OYO see the opportunities, but there are also similar companies that are trying to capture the market. MakeMyTrip, Trivago, and even IRCTC are looking to capture the market.

Financials

Impact of covid– pandemic has hit every industry, but mostly travel tourism and restaurant industries. OYO had a loss of 70%, revenue was down from 13,122 crores in FY20 to 3,943 crores in FY21.

If we see the data, the company is still up 3% for gross profit. This is because OYO focused on cost rationalization (reducing spending on the activities) more. The company had a policy of minimum guarantee payout, where the company paid over 14% in FY20, in FY20 they just paid 0.1%.
Similarly, they reduced spending for marketing, general, and admin expenses in the pandemic, which had saved a lot for the brand.

OYO raised a total of $807 million from Softbank in series F funding in 2019.

Strengths

For OYO IPO analysis we need to understand the strength of the company. As I mentioned before, OYO currently has more than 150k properties listed. This is the major strength of the company. How much large the network will be, that many customers will come, and that led to the exponential growth.

OYO didn’t stop within these services only, additionally, OYO has,-

• Weddingz.in– offers customers a fully managed, one-stop platform for all their needs to organize a superlative wedding experience including providing beautiful and spacious venues.
• OYO LIFE– A solution for long-term rented accommodation furnished with amenities at affordable prices.
• OYO Workspaces– Starting in July 2019, OYO Workspaces debuted its multi-brand approach to the managed workspaces opportunity in India (a first for the market) with two organic co-working brands- Powerstation and Workflow, alongside acquiring Innov8 and providing ergonomically designed workspaces befitting for every pocket.

weakness

• Yet the company is still far from the profitability path, as its main focus is to grow more. The industry is so competitive.
• The Company was also surrounded by a few crises and controversies that made headlines. A hotelier in Bengaluru filed a cheating case against Ritesh Agarwal and six others claiming that they had not paid him his dues in 2019.
• There is another article from The Tribune: Oyo founder Ritesh Aggarwal booked for fraud.

As I said before SoftBank has invested in OYO, which to it has a stake of over 40%, OYO has to look for foreign regulations always. In this business customer satisfaction is very much important, it’s their key priority. And this is one of the toughest parts of the business.

Conclusion

OYO is planning to raise over 8000 crores with an initial public offering for various reasons like repayments of borrowing some subsidiaries, investments for growth, general corporate purposes, etc. Though the company didn’t announce the lot size, price bands, and the date of opening. We need to wait for further updates!