Home >Companies >Start-ups >International expansion, high opex costs contributed to FY19 losses: OYO
Over the past two years, Oyo has launched in dozens of countries and spent hundreds of millions of dollars buying hotel firms.
Over the past two years, Oyo has launched in dozens of countries and spent hundreds of millions of dollars buying hotel firms.

International expansion, high opex costs contributed to FY19 losses: OYO

  • Oyo’s consolidated net loss ballooned to $335 million last year from $44 million in FY18
  • The startup has around 43,000 hotel partners and a million rooms on its inventory

Bengaluru: Hospitality startup Oyo Hotels and Homes reported a seven-fold increase in its losses for the financial year ended March 2019 (FY19), largely due to ongoing investments in China and other overseas markets, the company said on Monday.

Oyo’s consolidated net loss ballooned to around $335 million last year from $44 million in FY18. Oyo said China and other international markets which were in “development and investment mode" accounted for 75% of losses ($252 million) in the previous fiscal.

OYO's consolidated revenue stood at $951 million in FY19 compared with $211 million in the previous year, while India revenues totalled $604 million. Around 36.5% or $348 million was contributed by the company’s operations outside India, primarily in China.

OYO’s net loss as a percentage of its revenue grew to 35% of revenue in FY19 from 25% a year ago. However, in older markets like India, the startup reduced its losses to 14% from 24% of revenue in FY19.

In addition, the gross margin in India increased to 14.7% in FY19 from 10.6% a year ago, although Oyo did not detail the numbers for international operations.

The Bengaluru-based startup attributed the surge in losses during FY19 to inherent cost of establishing new markets, including those related to talent, market-entry, and operational expenses among others.

During calendar year 2019 (CY19), OYO claimed to have generated over 90% of its revenue from repeat customers and organic users, with repeat customers alone contributing to 73% of total revenues.

“We have crossed an important milestone of achieving global revenue of USD 951 million in FY 2019, a 4.5 times increase on a year-on-year basis. As we work towards consistently improving our financial performance, ensuring strong yet sustainable growth, high operational and service excellence and a clear path to profitability will be our key to our approach in 2020 and beyond," said Abhishek Gupta, OYO's global chief financial officer.

The startup currently has around 43,000 hotel partners and a million rooms on its inventory. Oyo currently operates on a franchise model where it takes over a hotel asset, renovates the space, and sells individual rooms under the Oyo branding. It claims to have hosted over 180 million between January to December 2019.

Oyo had earlier shared its financials for FY19 in a valuation report published in the ministry of corporate affairs in November 2019. The fresh audited figures released today comes at a time when Oyo has been laying off employees across India and other geographies to keep costs under check.

The laying off process, which OYO describes as 'right sizing', has happened over the last couple of months.

In an annual report card, Gupta said, "Over the past weeks, we have been reorganizing our teams across businesses, functions and geographies in line with goals and objectives for 2020, and beyond. As we drove tech-enabled synergy, enhanced efficiency and removed duplication of effort across businesses or geographies, unfortunately, some roles at OYO had become redundant. This was a deeply painful decision for us, given its impact on the affected employees, and we deeply regret it."

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