Venture

SoftBank cuts internal valuation of $10 billion Oyo to $2.7 billion

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Masayoshi Son onstage
Image Credits: Akio Kon / Bloomberg / Getty Images

SoftBank, the largest investor in Oyo, has cut the Indian hotel chain’s valuation to $2.7 billion at a time when the startup is months away from going public, a source familiar with the matter said.

An Oyo spokesperson said the startup has improved its finances in recent months, and it believes the speculation about a valuation cut is inaccurate. The markdown makes “no rational basis,” the spokesperson added. SoftBank declined to comment.

Oyo — whose backers include Sequoia India and Lightspeed Venture Partners India (both of which have taken significant exits from the startup), Airbnb and Microsoft — was valued at about $10 billion in a round in 2019. Oyo has raised $3.23 billion in equity (primary + secondary) and debt funding rounds over the years, according to insight platform Tracxn.

India’s Oyo valued at $10B after founder purchases $2B in shares

SoftBank owns 45% of Oyo, according to the startup. It’s not rare for investors to mark up or mark down the valuation of their portfolio startups, though other private investors may not agree with the assessment. Because SoftBank is the largest investor of Oyo and owns nearly half of it, the Japanese firm’s estimation is a strong signal of the startup’s current health.

Oyo held a board meeting earlier this month and did not share any updates on its valuation, nor acknowledge or comment on SoftBank’s estimation, according to a separate source familiar with the matter.

“We are confident that the above speculations about valuation markdown is patently incorrect. Valuation is an outcome of business performance. As per our latest audited results, we have clocked Rs 7 cr maiden adj EBITDA profit in the June quarter, at 41% gross profit margin and a 45% increase in gross booking value per hotel per month vs last financial year,” an Oyo spokesperson said in a statement.

“These are dramatically improved results and the strong performance trajectory is expected to continue. Hence, there is no rational basis for a markdown.”

Bloomberg News first reported about the valuation cut, noting that SoftBank had earlier slashed the Indian startup’s valuation to $3.4 billion.

The revelation comes at a time when Oyo is months away from going public. The startup earlier this week updated its initial public offerings application to the local market regulator. Oyo originally planned to raise up to $1.16 billion in the IPO at up to $12 billion valuation.

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