OYO may see SoftBank investment, overseas expansion through acquisitions

New Delhi: Ritesh Agarwal is an oddball character. He says he had few friends while in school in a remote district in Odisha and this pushed him to do things which kids normally do not try - like writing computer code. When he was sent to Kota after class XII to prepare for the IIT entrance exams, he left the engineering mecca within six months. He was scared that instead of making him a techie, an IIT course will make a physics scholar of him.

OYO Rooms, CEO and founder, Ritesh Agarwal.

While in Kota, Agarwal says he used to take a bus to Delhi every weekend to connect with entrepreneurs and remembers some big names in the e-commerce world today, mentoring youngsters and hanging out with them at events. He also realised around the same time that trying to get an affordable and reliable place to stay, even in a megapolis like Delhi, is next to impossible. So out went the IIT dream and Agarwal started his own business - of offering branded hotel rooms - with very little capital and just one employee.

"I realised being humble was very important. So was the ability to recognise a problem and then create technology to solve it.....I have tried to remain true to both these learnings," says 21-something Agarwal, CEO and founder of OYO Rooms. A comparison with another young entrepreneur from a property listings start-up, who also makes news now-a-days for reasons other than humility, is inevitable.

Agarwal brushes aside the comparison, saying humility is at the core of what he does.

OYO is the largest network of branded hotels today in India, a platform to search for budget rooms anywhere in the country which are clean and of reliable quality. Agarwal began by launching Oravel, a platform where people looking for rooms could connect with guesthouse owners in 2012. While working on this platform, he chanced upon a small guesthouse in Gurgaon where occupancy was dismal and the owner was busy with another business. Agarwal says he promised the guesthouse owner at least 80 percent occupancy, branding etc. within 6-7 months, took over the reins and worked with minimal staff to get this guesthouse going. This became the first OYO Rooms property and is now called OYO Rooms Huda City Centre. Alongside starting a business from scratch, Ritesh also got selected as the only Indian for Thiel Fellowship in 2012. This entailed a $100,000 grant by Peter Thiel - the Fellowship intends to create entrepreneurs across the world, under the age of 20.

So with the Thiel corpus and getting committed professionals on board, Agarwal expanded his business rapidly. Today, OYO Rooms has 8,000 rooms across 25 cities and 700 hotels on offer. These could be dharamshalas, apartments, guesthouses or even premium rooms. Agarwal claims OYO has 2 lakh nights per month on bookings as of today. And says his target is to have 30,000 rooms across 45 cities and 2500 hotels by December under OYO.

OYO has already raised over $25 million from a clutch of well-known investors. These include Lightspeed Ventures, Sequoia Capital and Green Oaks Capital.

And there has been a persistent buzz about Japan's SoftBank being in negotiations with Agarwal for investing up to $100 million in OYO. He does not confirm the talks, merely saying there is a lot of "in bound" investor interest in the company but that his venture is well funded for at least one more year. But if negotiations with SoftBank do work out, OYO Rooms will join the handful of Indian startup giants like Ola, Paytm and Snapdeal which have seen significant investments from SoftBank. In fact, if this investment does happen, it could catapult OYO Rooms to exponential expansion within the country.

Agarwal claims OYO already controls more than 90 percent of the domestic market and points out "copycats" without naming them, companies which have sprung up in recent months doing much of what OYO already does. He says one such competitor has set up the business in Singapore and Thailand markets and perhaps it is for the best - when Oyo thinks of going beyond Indian boundaries, these ventures could well form its acquisition targets.

"Acquisitions and investments - if these are required to solve the problem of room availability and quality, we will consider doing these things," he says. Oyo has estimated that at present, there are two million unbranded rooms available across the country.