Startup Oyo reported a loss of $ 335 million on Monday with worldwide sales of $ 951 million for the fiscal year ended March 31, 2019, and promised to cut spending as the company is headquartered in India being cautious given its aggressive expansion.
The six-year-old startup's growing revenue of $ 211 million in the fiscal year ended March 31, 2018 (FY 18) is in line with the company's ambitions to take a clear path to profitability this year, said Abhishek Gupta, Global CFO of OYO Hotels & Homes, in a statement.
But the loss of the startup has also increased. The consolidated loss of $ 335 million in fiscal year 19 increased six-fold from $ 52 million in fiscal year 18. In India, where Oyo had sales of $ 604 million in fiscal 19 (up 2.9 times since fiscal 18), it lost 14% (from 24%) of sales in fiscal 19 to $ 83 million Reduce US dollars.
According to Indian law, all local startups – and international companies – have to disclose their annual financial data. Most of them submitted their financial information in early October.
The startup, which now operates more than 43,000 hotels with over one million rooms in 800 cities in 80 countries, said its expansion in China and other international markets contributed to the loss. Oyo entered China in 2018, saying that the world's most populous nation has already become its second largest market.
“These markets made up 36.5% of global sales. While the company continues to improve in mature markets such as India, where gross margins are already improving, the company is determined to introduce the same budget discipline in emerging markets in the coming fiscal year, ”the startup said.
Aditya Ghosh, who served as the startup's executive director and is now a board member, said in an interview with reporters that Oyo has been growing since entering a number of markets last year and some investment was required. Ghosh spoke specifically of China and said the company, like many others, is watching the outbreak of the corona virus, which has led to the closure of some hotels.
He also said that the startup is not looking for other markets for the time being.
Work is currently underway to improve the gross margin. In India, the gross margin rose from 10.6% in fiscal 18 to 14.7%.
Oyo has been examined in recent months for its aggressive expansion, which some analysts believe is unsustainable. The startup, which renames and renovates independent budget hotels, has also made a sketchy effort to sign new hotels, as the New York Times documented earlier this year. Several hoteliers have claimed that Oyo failed to honor his agreements and owed them money.
In 2019, Oyo, whose investors include Airbnb, expanded in Europe and the United States, among others. The company bought Axel Springer's Leisure Group for $ 415 million to target the European vacation rental market – and announced plans to invest an additional $ 335 million in these efforts. In the same month, the company announced that it had acquired the Hooters Casino Hotel Las Vegas for its first property purchase in the United States for around $ 135 million.
The company also entered Japan in partnership with SoftBank. Bloomberg reported on Sunday that Oyo currently has approximately 7,500 rooms in the country, less than 1% of its ambitious goal of 1 million.
In recent months, Oyo executives have recognized that the startup has grown too quickly and faces a number of “teething problems”. Oyo has fired at least 3,000 people, mainly in India, in the past three months.
"The increased focus of the company on corporate governance and the establishment of a high-performance work culture, in which the employees come first, will also drive this next phase of sustainable growth for us," said Gupta.