OYO: Toxic Culture, Troubling Incidents Reported At Softbank's India Jewel

Oyo is part of a group of prominent start-ups that have sprinted to get as big as possible, fed
by money from large investors such as the Japanese conglomerate SoftBank
Masayoshi Son, SoftBank’s chief executive, has hailed Oyo as a jewel of his company’s $100
billion Vision Fund.

Oyo, a start-up that offers budget hotel rooms, has grown into one of India’s most valuable
private companies and aims to be the world’s largest hotel chain by 2023. But at least part of
Oyo’s rise in India was built on practices that raise questions about the health of its business,
according to financial filings, court documents and interviews with 20 current and former
employees, as well as others familiar with the start-up’s operations. Many spoke on the
condition of anonymity for fear of retaliation from the company.

Oyo offers rooms from unavailable hotels, such as those that have left its service, according
to the company’s chief executive and nine of the current and former employees. That has the
effect of inflating the number of rooms listed on Oyo’s site. Thousands of the rooms are from
unlicensed hotels and guesthouses, its executives have acknowledged. To deter trouble from
the authorities over the illegal rooms, Oyo sometimes gives free lodging to the police and
other officials, according to nine of the current and former employees and internal WhatsApp
messages viewed by The New York Times.

Oyo has also imposed extra fees on hotels and declined to pay the hotels the full amounts
they claimed they were owed, according to interviews with hotel owners and employees,
emails, legal complaints and other documents viewed by The Times. Some hotel operators
have sought to file criminal complaints against Oyo, which said it withheld payments
primarily over the hotels’ customer service issues.

“It’s a bubble that will burst,” said Saurabh Mukhopadhyay, a former Oyo operations
manager in northern India who left the company in September. Oyo is part of a group of
prominent start-ups that have sprinted to get as big as possible, fed by money from large
investors such as the Japanese conglomerate SoftBank. Now some of those
young companies — from the office rental company WeWork in New York to the delivery
service Instacart in San Francisco — have started showing cracks in their businesses.

Any fall by Oyo could blight India’s start-up landscape, which has received billions in
foreign capital in recent years, spawning other multibillion-dollar companies such as the ride-
hailing firm Ola and the digital payments provider Paytm. It would also be another black eye
for SoftBank, which is Oyo’s biggest investor and owns half the start-up’s stock. Masayoshi
Son, SoftBank’s chief executive, has hailed Oyo as a jewel of his company’s $100 billion
Vision Fund, even as he recently wrote off billions of dollars on other investments like
WeWork.

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“This is the only company which went global at this scale from India,” Satish Meena, a senior
forecaster for the research firm Forrester in New Delhi, said of Oyo. “But as of now, there are
serious doubts about the business model.”

SoftBank declined to comment.

Ritesh Agarwal, Oyo’s chief executive, acknowledged in a recent interview that some of his
company’s room listings included hotels that it no longer worked with. He said Oyo left those
listings up and marked them as “sold out” as it tried to woo the hotels back.

Aditya Ghosh, Oyo’s head of India operations, also said in an interview that many hotels
lacked required licenses, leaving them vulnerable to the occasional government raid. He
denied that Oyo gave free rooms to officials. Mr. Ghosh dismissed what he called “noise”
from hotels about extra fees and non-payment of bills. “The disagreement is about the
penalties we charge on customer service failure,” he said.

He added that nearly 80 percent of Oyo’s employees had been at the company for less than a
year, so training has been a challenge. “We have just grown very, very fast,” he said.
Founded in 2013 by Mr. Agarwal, then a 19-year-old student, Oyo set out to organize India’s
budget hotels, which have traditionally been small, family-run enterprises. The company
coaxes the hotels to become Oyo-branded destinations that list exclusively through its
website; it then markets those rooms online to travellers and takes a cut of each stay. The
start-up also runs some hotels itself.

Oyo is trying to expand globally and now offers more than 1.2 million rooms in 80 countries,
including the United States. It employs more than 20,000 people and has raised more than
$2.5 billion in funding. Mr. Agarwal has become a business star, hobnobbing with India’s
prime minister, Narendra Modi. But as Oyo has grown, its losses have mushroomed. The
company expects to lose money through at least 2021, according to recent government
filings. Some efforts to expand in countries like Japan have flopped. In December, SoftBank
and Mr. Agarwal put another $1.5 billion into Oyo to accelerate its expansion. The funding,
negotiated over the summer, valued the company at $8 billion.

At the same time, two other big investors, Sequoia Capital and Lightspeed Venture Partners,
reduced their holdings. The venture capital firms, which both hold board seats at Oyo, sold
$1.5 billion of their stock — about half their stakes — to Mr. Agarwal. He borrowed money
to buy the shares and paid the venture firms a price that valued Oyo at $10 billion. Lightspeed
and Sequoia declined to comment.

The current and former workers said that Oyo was never an easy place to work but that
pressure increased over the last year. Mohammad Jahanzeb Gul, who joined the start-up in
January 2019 and supervised 23 Oyo properties, said that during the nine months he was
there, he sometimes spent all day and night in front of a computer to meet deadlines. “The
culture is really very toxic,” he said.

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Mr. Mukhopadhyay, who began working at Oyo in August 2018, said employees were under
so much pressure to add new rooms that they brought hotels online that lacked air-
conditioning, water heaters or electricity. He and eight others said their managers had asked
them to engage in a monthly shell game of briefly inserting these unavailable properties into
Oyo’s listings — complete with fake photographs — to help impress investors.

Mr. Ghosh, who left the India job this week and joined Oyo’s board, said that some hotels
open in stages and that “there is no padding.” Saurabh Sharma, who worked for Oyo from
2014 to 2018 as an operations manager, said the company sometimes deliberately withheld
payments from hotel owners — a practice that half a dozen other current and former
employees also described.

In some cases, they said, the start-up wanted to squeeze the hotel owners into renegotiating
contracts that it deemed unprofitable. In others, Oyo wanted to save money and figured that
most owners would not press for full payment. “If 1,000 people shout, we will pay 200,” Mr.
Sharma said Oyo managers had told him. In a police complaint filed in November, Betz
Fernandez, owner of the Roxel Inn in Bangalore, said Oyo owed him $49,000 and acted with
“intention to cheat and cause wrongful loss” by charging him for non-existent guests and
refusing to pay the contracted minimum monthly payment. Oyo said the dispute was in
arbitration.

Oyo’s oversight of its workers was also sometimes so lax that employees brazenly stole from
it, said four people who were involved in the start-up’s fraud-fighting efforts. Because Oyo
hotels are popular with unmarried couples looking for places for their trysts, one scheme
involved workers at properties run directly by the start-up colluding to keep the guests
checked in after they left. The workers then cleaned and resold the rooms for cash to other
guests and pocketed the money, the people said.

Oyo has conducted surprise raids at some properties, seizing employee cell phones and
checking rooms and records for evidence, they said. An Oyo spokeswoman said it
investigates all fraud accusations and had in some instances fired employees. Executives have
also asked employees to paper over troubling incidents, some workers said.

Mr. Mukhopadhyay said that one-night last June, a long-term guest at an Oyo-run property in
Noida, near New Delhi, called him. She said three men had raped her in her room. The next
morning, Mr. Mukhopadhyay and another Oyo employee were summoned to the police
station, where they pleaded with the guest not to register a formal complaint. Oyo’s legal
team also instructed them not to tell anyone about the incident because it could hurt the
company’s image, he said. The guest withdrew the complaint and moved out.

In a telephone interview, the guest confirmed Mr. Mukhopadhyay’s account. Oyo disputed
some details and said any decision to file a complaint was up to the guest. The Noida police
said they had no record of a complaint. To placate the authorities over unlicensed properties,
Oyo managers also gave the police and other government officials free rooms on request,

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current and former employees said. They said the details were recorded in dedicated
WhatsApp groups, one of which The Times reviewed.

Mr. Ghosh said, “We do not encourage or involve ourselves in any kind of bribery or graft.”

Mr. Mukhopadhyay said Oyo’s growth practices contributed to his decision to leave.

“There’s something called integrity,” he said. “I can’t compromise on that.”

BS: Fri, January 03 2020.

Travel Trends: Where Indians Went And Stayed In 2019, Reveals Oyo Report
In 2019, Oyo saw some interesting travel trends through its properties

 OYO ramps up presence in UK; expands to over 100 hotels across 25 cities
 Working towards taking Oyo Hotels global, says founder Ritesh Agarwal
 Oyo raises $1.5 billion at $10 billion valuation; to focus on US market

In 2019, Oyo saw some interesting travel trends through its properties. In its second edition
of Oyo Annual Travelopedia 2019, Oyo Hotels and Homes revealed the following trends:

BS: Fri, December 27 2019

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 OYO's Valuation Continues To Soar Despite Losses; Hovers Near $10-Bn
Mark
The losses have reportedly mounted due to the rise in operating expenses fuelled by the
company's aggressive expansion in overseas markets
 Ritesh Agarwal to deploy $2 billion in his hotel start-up OYO to boost stake
 From Paytm to Oyo, Softbank's Masayoshi Son shines a light on his proteges
 SoftBank CEO Masayoshi Son says 'embarrassed and flustered' by track record
 Lessons from the WeWork fiasco
 Wrapped in mystery

Hospitality unicorn OYO's valuation has almost doubled in a year, reaching $10 billion
between September 2018 and October 2019, despite significant losses in the financial year
ending on March 31. The losses have reportedly mounted due to the rise in operating
expenses fuelled by the company's aggressive expansion in overseas markets. The provisional
net loss of the company jumped from Rs 360.43 crore in the previous financial year to Rs
2,384.69 crore this year, according to unaudited financials prepared by a valuation expert.

"The numbers are based on a valuation report prepared by OYO's valuers (not auditors) that
includes certain provisional financials for FY 19. It may be pointed out that the valuation
parameters such as share prices are based on fair market value and are not reflective of the
share premium price," an OYO spokesperson said in a statement.

"We would like to clarify again that these are not the final audited financials and the same
will be issued later by the company along with the annual report that we issue every year and
file with the RoC as well," the spokesperson added.

But this did not reduce the growth in the valuation of the company backed by Japanese
billionaire Masayoshi San's Softbank Vision Fund. The major boost came from the $700
million investment made by OYO CEO Ritesh Agarwal in October this year through RA
Hospitality Holdings (Cayman).

OYO announced in October that it would raise $1.5 billion in the Series F funding round,
whereby RA Hospitality Holdings will infuse approximately $700 million as primary capital
in the company, with the balance $800 million being supplemented by other existing
investors.

A significant part of the funds will be diverted towards its growth plans in the US market, and
in strengthening the company's position in the vacation rentals business in Europe, the
company said. Earlier this year, RA Hospitality Holdings received Competition Commission
of India approval to invest $2 billion in OYO.

"In order to facilitate this transaction, Lightspeed Venture Partners and Sequoia, are selling
part of their shareholding in OYO to help the founder increase his stake while remaining
invested and committed to the company's long-term mission," OYO said.

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OYO had risen over $1 billion in its last financing round, announced in September 2018, led
by SoftBank through SoftBank Vision Fund, with participation from existing investors
Lightspeed Venture Partners, Sequoia and Greenoaks Capital and supported by new strategic
partners like Airbnb.

OYO is present in over 80 countries. As per the company, it witnessed "3.8x" year-over-year
revenue growth in August 2019. However, the company's growing losses provoke
comparison with the struggling co-sharing workspace company WeWork which recently lay
off 2,400 employees following its failed attempt to go public.

This long-anticipated layoff is the biggest move by Japanese technology conglomerate

SoftBank Group Corp, which is providing a $9.5 billion lifeline and will soon own about 80
per cent of WeWork's shares.

BS: Fri, November 29 2019.

Softbank-Backed Oyo Raises $1.5 Bn At $10 Bn Valuation For Market

Expansion
Agarwal, who founded Oyo in 2013, has built it into India's second-most valuable start-up
with a valuation of about $10 billion
 Ritesh Agarwal to deploy $2 billion in his hotel start-up OYO to boost stake
 Wrapped in mystery
 Inside Oyo Hotels founder Ritesh Agarwal's $1.5 bn share buyback plan
 OYO's Ritesh Agarwal to buy back shares worth $2 bn from early investors
 From Paytm to Oyo, Softbank's Masayoshi Son shines a light on his proteges

Oyo Hotels and Homes is raising $1.5 billion from founder Ritesh Agarwal, SoftBank Group
Corp and other investors as the India lodging start-up expands into foreign markets such as
the US and Europe. Agarwal, 25, will spend $700 million to buy new shares in the company
as part of a previously reported $2 billion plan to triple his ownership stake. Existing
investors SoftBank’s Vision Fund, Lightspeed Venture Partners and Sequoia India will
contribute the rest of the current round.

Agarwal, who founded Oyo in 2013, has built it into India’s second-most valuable start-up
with a valuation of about $10 billion. Its service covers 1.2 million rooms in over 80
countries, including 590,000 rooms in China. It entered the U.S. earlier this year and now has
7,500 rooms in 60 cities. “We truly believe that we will be able to build a truly global brand
out of India, while ensuring that the business is run efficiently and with a clear path to
profitability,” Agarwal said in a statement.

The young founder made headlines in July with plans to spend $2 billion to raise his stake in
the company to 30% from about 10%. Japanese banks Mizuho Financial Group Inc. and
Nomura Holdings Inc. are bankrolling Agarwal’s share acquisition, according to people

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familiar with the deal. He is buying some of those shares from Sequoia and Lightspeed, and
will carry out the transaction through an entity called RA Hospitality Holdings, Oyo said.

Agarwal is tripling down on the company he created at a time WeWork’s internal tumult and
a string of disappointing IPOs are raising questions about start-up price tags. The $10 billion
valuation makes Oyo India’s most valuable start-up after One97 Communications, the parent
of digital payments pioneer Paytm. E-commerce giant Flipkart Online Services Pvt was
acquired by Walmart Inc. last year in a $16 billion deal. SoftBank’s investments lifted the
valuations at Oyo, Paytm and WeWork.

Agarwal founded the start-up in his teens after dropping out of college and roaming India on
a shoestring budget. The wild, erratic standards at hotels and guest houses he encountered
inspired him to start the online service, and the brand now aims to provide travellers a
consistent experience.

Oyo mainly signs on hotel owners and then helps them upgrade everything from bathroom
fittings to furniture and bedding, and then provides them standardized supplies like sheets and
toiletries, and support to train their staff.

It employs hundreds of people in the field who evaluate properties on some 200 factors, from
the quality of mattresses and linens to water temperature. To get a listing, along with a bright
red Oyo sign to hang street-side as a seal of housekeeping approval, most hoteliers must
agree to a makeover that typically takes about a month. Oyo then gets a cut of roughly 25%
of every booking. Rooms usually run between $25 and $85.

First Published: Mon, October 07 2019.

Oyo Raises $1.5 Billion At $10 Billion Valuation; To Focus On US Market

A significant part of the Series-F funding will be diverted in boosting US footprint, and in
strengthening position in the vacation rentals business in Europe
 Working towards taking Oyo Hotels global, says founder Ritesh Agarwal
 OYO ramps up presence in UK; expands to over 100 hotels across 25 cities
 Inside Oyo Hotels founder Ritesh Agarwal's $1.5 bn share buyback plan
 OYO's hospitality paid loyalty programme touches 1.5 million subscribers
 Ritesh Agarwal to deploy $2 billion in his hotel start-up OYO to boost stake

Oyo Hotels & Homes is raising $1.5 billion from founder Ritesh Agarwal (pictured) and
investors led by SoftBank, valuing it at $10 billion, reaching a big milestone in its 6-year
history. Of the $1.5 billion, Agarwal’s RA Hospitality Holdings will spend approximately
$700 million and the rest will be supplemented by existing investors.

A significant part of the Series-F funding will be diverted in boosting the US footprint, and in
strengthening the position in the vacation rentals business in Europe. “On a year-on-year
basis, we have seen that not only are we operating profitably at the building level but at the

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same time our Ebitda (earnings before interest, tax, depreciation and amortisation) has also
improved by 50 per cent.

The losses as a percentage of NRV have also been on a steady and significant declining
curve. Our immediate goal is to make forward-looking investments so we can achieve our
mission, while delivering on our fiduciary responsibility to our investors by building a
sustainable business,” Agarwal, founder and CEO (global), Oyo, said.

Agarwal’s investment will be part of the $2-billion plan, announced earlier, to treble his
ownership stake. Lightspeed Venture Partners and Sequoia are selling part of their
shareholding in Oyo to help Agarwal increase his stake. Oyo claims to have a strong balance
sheet, with over $2 billion. Oyo had raised over $1 billion in September 2018.

This fundraising saw participation from SoftBank, Lightspeed Venture Partners, Sequoia, and
Greenoaks Capital, and new strategic partners like Airbnb. Oyo has undergone wholesale
corporate restructuring, setting up several subsidiaries and bifurcating operations globally.

Agarwal has moved from executive director to a non-executive director in Oyo’s India
operation to allow him to take up a more active role in the global operations of Oravel Stays
Singapore. “It is our ultimate holding entity for all our global operations. My deeper
engagement in the global business is a natural progression, given our continued growth over
the last couple of years and the opportunities in the US, Europe, China, and Southeast Asia,”
Agarwal had recently told Business Standard.

Fast Facts
Number of countries where present: 80 plus China: 338 cities and over 590,000
rooms Indonesia: 100-plus cities and over 27,000 rooms US: 60 cities and over 7,500
rooms3.8x YoY growth in revenue in Aug 2019 (vs Aug 2018) Total rooms: 1.2 Mn under
management
First Published: Mon, October 07 2019.

Room For More: Oyo To Raise Another $1 Bn As It Adds Stars To Its Hotels
The plan is to take up luxury properties in India and abroad
This fresh round of funding is separate from the recent $1.5 billion share buyback
orchestrated by Agarwal

 Working towards taking Oyo Hotels global, says founder Ritesh Agarwal
 OYO ramps up presence in UK; expands to over 100 hotels across 25 cities
 Oyo to rebrand Las Vegas-based Hooters, bring a 35,000 square-foot casino
 OYO's hospitality paid loyalty programme touches 1.5 million subscribers
 OYO's loss-income ratio estimated to have halved in 2018-19

Oyo is eyeing $750 million to $1 billion in fresh funds in its parent company Oravel Stays
over the next few months, according to sources close to the development.

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The SoftBank Group might lead the funding round, which will push Oyo’s valuation to
$13.5-15 billion.

Oyo is likely to spend the funds on massive diversification, an executive in the know told this
newspaper. Among other things, the Ritesh Agarwal-led group is planning to manage and
operate five-star and luxury properties globally. This fresh round of funding is separate from
the recent $1.5 billion share buyback orchestrated by Agarwal. The firm was valued at close
to $10 billion at that point. The Competition Commission of India has approved Agarwal’s
share buyback plan.

Oyo has undergone wholesale corporate restructuring, setting up several subsidiaries and
bifurcating operations globally. Agarwal has moved from executive director to a non-
executive director in Oyo’s India operation to allow him to take up a more active role in the
global operations of Oravel Stays Singapore Pte.

“It is our ultimate holding entity for all our global operations. My deeper engagement in the
global business is a natural progression, given our continued growth over the last couple of
years and the opportunities in the US, Europe, China, and Southeast Asia,” said Agarwal in a
recent interview to Business Standard.

He added that the move was part of ongoing structural changes introduced over the last year
as Oyo expanded its global operations. It did not, he said, alter his commitment to India, a
key home market which continues to grow. Moreover, he will continue to be on the board of
Oyo’s global parent entity, Oravel Stays.

Checking into luxury hotels

Sources said Oyo’s investors have been waiting for it to go through this corporate
restructuring before the next funding round. Globally, the company has been trying to
diversify its portfolio. In the next level of growth, it plans to take up luxury hotels in India
and abroad. Sources said around 25 ‘ultra-luxury’ properties might be opened globally over
the next few months.

Oyo has been on the lookout for property companies, which will acquire these hotels, while
Oyo will be the day-to-day operating partner.

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Sources said that the lion’s share of the next round of funding will be earmarked for acquiring
these luxury properties. The remainder will be spent on adding more co-working, co-living,
and student housing spaces, which the company is so bullish about that it might take these
operations abroad.

In some cases, Oyo has also been acquiring a minority stake in property companies. It has
partnered with Gurgaon-based hospitality firm Mountania Developers to acquire and redesign
an Ahmedabad-based property into a luxury hotel.

“In future, most of the luxury properties Oyo decides to run will be mostly taken up by
Mountania in India. Globally also, Oyo is finding such partners,” said a source.

The company recently rebranded Hooters Casino Hotel in Las Vegas as a 657-room and
35,000 square-foot casino called Oyo Hotel & Casino Las Vegas in partnership with
hospitality investment and management company Highgate.

Oyo claims to have a strong balance sheet, with over $1.5 billion and over a million rooms
under management across hotels and homes globally, of which 200,000 are in India.

BS: Mon, September 23 2019

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