Business is Hit by Corona, OYO Prepares IDR 14.1 Trillion for IPO
Indian hotel chain startup business, OYO has been hit by the corona pandemic. Even so, the company still has US$ 1 billion or around IDR 14.1 trillion in funds to be used to survive and prepare to offer an initial public offering (IPO).
The founder of OYO Ritesh Agarwal said the company was very disciplined in ensuring steps to survive amid the coronavirus pandemic. “We are maintaining nearly US$ 1 billion (IDR 14.1 trillion) in cash,” he said as quoted by Tech In Asia, Wednesday (2/12).
The funds are also prepared to take the floor on the stock exchange or IPO. “From the management side, we ensure that the company is ready to go public,” said Ritesh as quoted by The Economic Times, Wednesday (2/12). However, the company will consider several things such as market situation, IPO opportunities, and others. Therefore, Ritesh could not spoil his time yet.
Focused on 5 Core Markets
On the one hand, the company is working to survive the Covid-19 pandemic. OYO also only focuses on five core markets, namely India, Southeast Asia, Northern Europe, China, and the United States (US). Ritesh said the company did not enter into new markets after the pandemic.
He claims, OYO leads the market in India, Southeast Asia, and Northern Europe. Meanwhile, China and the US were assessed as potential markets. Currently, OYO operates around eight thousand hotels on a franchise basis and 800 on an independent business model. This startup has also been present in more than 80 countries, including Indonesia.
The OYO business has indeed gradually recovered from the pandemic storm when several countries relaxed social restrictions. Additionally, there have been recent advances with vaccine trials. Ritesh hopes the travel and hospitality industry will bounce back strongly.
Globally, the company’s profit or gross margin has reached 85% of pre-pandemic levels. The company also posted 30% monthly growth since last August. “We see that about 40-45% of our room orders are filled in India,” said CEO of OYO in India and South Asia, Rohit Kapoor.
The SoftBank-funded startup laid off more than 7,000 employees globally at the start of the year. The wave of layoffs at OYO continued with the laying of around 5,000 employees when the pandemic broke out in March.
OYO also applies two to three months of unpaid leave or unpaid leave for thousands of other employees. “The steps for unlimited leave and unpaid leave show that OYO’s revenue and cash flow have dropped sharply,” said CEO of IB Research & Consulting Inc. Daisuke Seki, last April (14/4).
The company’s revenue also fell 50-60 percent, or deeper than the initial estimate of 10-15 percent. The occupancy rate of OYO has also decreased by 60% during the pandemic. “The pandemic is coming in waves and it’s making them even more difficult,” said Satish Meena senior forecast analyst at Forrester Research Inc.
OYO Strategy to Healthy Business Finances
Adaptation to health protocols is the main focus and solution for the resurgence of the accommodation business during the Covid-19 pandemic and a new normal with the risk of increasing operating costs.
OYO Indonesia Country Head Agus Hartono Wijaya admitted that the implementation of the health protocol, which requires the addition of a number of needs for lodging and property, also adds to the operational costs of OYO partners.
According to him, this condition is an inevitable decision considering that health protocols and hygiene guarantees are the keys to gaining consumer confidence in staying active and traveling.
Therefore, Agus and the OYO Indonesia team acknowledge the importance of making adjustments or adjustments to the management of accommodation business costs to ensure that the cash flow of OYO partners is well maintained during the pandemic.
Thanks to the implementation of health protocols and closing other expenditure taps to maintain cash flow, the occupancy of OYO partners has recorded a slight increase. In fact, Agus said that OYO was still ambitious to add new partnerships in several existing areas.