In June this year, OYO rooms has forayed into China and it appears that it has started showing benefits or better call a jackpot for the Indian hospitality startups, China’s Didi Chuxing has shown an interest to invest in Oyo, reported Economic Times, today.
The funds, however, will be invested into OYO’s Chinese unit and not the Indian one, said the report, which also means that the Gurgaon-based startup will split operations of the budget hotel network into two — India and China operations. OYO is reportedly looking to raise funds to the extent of $1.1 billion in this fresh round of which around $500 million would go to OYO China and the rest to OYO Global which includes the Indian side of the business.
OYO, which recorded a gross booking value of $500-600 million, expanded into 26 Chinese cities, making it the third overseas market for the company after Malaysia and Nepal.
If the deal goes through, it will Didi Chuxing’s second bet in India after it invested in ride-hailing startup Ola. It is to be noted that, Didi is Uber rival in China and.
If the proposed funds are raised, OYO could get valuation of about $4.5 billion, as per reports. Earlier in July, it was reported that OYO is close to raise fresh funding of about $300-500 million from Chinese internet giant Tencent, which could value OYO at $2 billion.
On the China side a big chunk may be taken by the popular hail-ride firm Didi Chuxing and WeWork, a startup that deals with shared office space in China. The two Chinese firms may have limitations in making investments only within China and therefore this split-up has been necessitated. A 100% subsidiary will now stand diluted to 50% to accommodate this arrangement.
The report also said that OYO’s largest investor, so far, Japan’s SoftBank is bringing in its funds too to keep its proportion of holding at almost the same levels as earlier, which is around 40-42%. It is being explained that SoftBank has a limitation that if its holding goes above 50%, then it has to buyout the rest of the stakeholders. Besides SoftBank, there are other investors like Sequoia Capital and Lightspeed Venture Partners who will also be willing to take appropriate positions in OYO’s China operations.
Coming to OYO’s operations in China, OYO has signed up around 1000 properties in many Chinese cities in the tier 2 3 & 4 levels where the average room rent charged per night is around $20-25. The potential to grow further and to expand to higher segments like the branded hotels is also seen to be quite bright.
[Top Image – Hotels.com]