Microsoft invests in Oyo at $9 billion valuation

Microsoft has finalised a strategic investment for an undisclosed amount in SoftBank-backed Oyo Hotels & Homes, valuing the hospitality company around $9 billion, industry sources familiar with the matter told ET. Investment bankers said Oyo could be looking at adding more marquee strategic investors ahead of its initial public offering (IPO), which would follow last week’s bumper local listing by food services platform Zomato.Sources told ET that the global technology major will initially buy a small stake, but it has the option to raise ownership later. Oyo did not respond to ET’s mailed queries. Microsoft said it had no comments to offer on the matter.Microsoft’s proposed strategic investment follows the hospitality company’s move to raise $660 million in term loan B (TLB) funding from global institutional investors earlier this month. This round was oversubscribed 1.7 times. Oyo is currently backed by investors such as SoftBank Vision Fund, Sequoia Capital, Lightspeed Ventures, Airbnb and Hero Enterprise.Sources privy to the development said Oyo is likely to use the funding to scale up its technology play and grab more market share at a time when the hospitality industry is trying to clamber out of the Covid sinkhole that has drowned several competitors, potentially lowering competitive intensity and triggering consolidation.Earlier this year, HT Media Ventures reportedly invested $7.31 million in Oyo in a series F1 funding round.Zomato listed its shares on July 23 and was the first start-up in India to reach a market value in excess of Rs 1 lakh crore on debut. It had raised Rs 4,196 crore from several anchor investors ahead of its much awaited IPO in July.The development also comes at a time when Microsoft has shown interest in making strategic investments in technology disruptors from emerging markets such as India.In June last year, Microsoft opened its venture fund office M12 in India in Bengaluru, its fifth M12 office in the world. The company has reportedly been keen on pursuing investment opportunities in the B2B software startup space, with a focus on artificial intelligence (AI), business applications, infrastructure, security, and vanguard technologies.Following the TLB funding, Abhishek Gupta, Oyo’s group chief financial officer, had told ET earlier this month that the funds will be used for retiring previous debts, strengthening the balance sheet and enhancing product technology investments.Gupta had said the company saw a healthy recovery with a vaccination rate of over 40% of the total population in Europe. He had said India is three to four months from that rate and once India reaches that threshold, the recovery would gather pace. He had said Oyo is ‘well capitalized’ and on the path of achieving profitability.The hospitality sector is seeing some initial signs of recovery led by returning interest in leisure travel with declining Covid-19 cases in the country. Hotel occupancies in all the major cities witnessed a month on month increase with the revival in leisure travel in June, according to HVS Anarock's latest Hotels & Hospitality Overview report.Oyo became the first Indian startup to be rated by international ratings agency Moody’s and Fitch ahead of the TLB funding. It had also said earlier that its India business became EBITDA positive just before the onset of the second wave.In 2017, Microsoft had invested in India’s e-commerce major Flipkart and as per media reports, the company is also in talks with the Telangana government to set up a $2-billion data center. In August 2019, Reliance Industries subsidiary Reliance Jio Infocomm announced a 10-year partnership with Microsoft, aimed at ‘accelerating digital transformation’ in India.Citing Venture Intelligence, ET reported earlier this month that Indian startups raised $12.1 billion from venture capitalists and private equity firms in the first six months of this year, beating last calendar year’s overall funding by $1 billion. The continued inflow of funds helped propel a record number of start-ups into the unicorn club.

from Economic Times https://ift.tt/2VhZN1F