Chinese ride-hailing giant Didi Chuxing has invested $100 million in hospitality chain Oyo Hotels & Homes. The investment, which continues to value Oyo at about $5 billion, has been made from Didi-controlled entity Star Virtue Investment, people aware of developments told ET.
This brings to a close Oyo’s $1 billion financing round led by existing backer SoftBank Vision Fund, which has pumped $800 million into the company.
The Didi investment comes a little over two months after Singapore-headquartered transportation major Grab infused the same amount in the Gurgaon-based startup.
People familiar with the deal said that Beijing-headquartered Didi’s investment is likely to be channelled into Oyo’s fast-growing China business — Oyo Jiudian — a geography that the company has begun referring to as its second home market. A fair chunk of the investment will also come into Oyo’s India operations, they said. A representative for Oyo confirmed to ET about the official closure of the $1-billion round.
Relationship Dates Back to 2017
“$900 million was closed back in the quarter ended December 2018 and we have also received the balance $100 million as disclosed in the RoC filings. We do not have any further comments,” the spokesperson said. Didi Chuxing did not reply to ET’s queries until press time. JPMorgan acted as the financial advisor to the transaction.
The relationship between the two companies dates back to 2017 when Oyo had used the ride-hailing platform to announce its foray into the world’s second-largest economy. At that time, the tagline read, ‘Ride comfortably with Didi, Stay comfortably with Oyo.’
Sources in the know said Didi will partner Oyo as it expands into new geographies and may deepen its strategic partnerships as they both grow globally. Oyo is present across the UK, Southeast Asia and China, in addition to operations in its home market. There have been reports about the company also foraying into the US.
According to data released by the Gurgaon-based company last month, Oyo Jiudian is present in 280 cities across China, operating more than 5,000 hotels and 260,000 rooms. It runs a mix of franchised and leased properties there.
Additionally, sources told ET, Japan’s SoftBank, which already holds around 42% in Oyo, will see a similar shareholding in the China subsidiary. Other existing investors in the company such as Sequoia Capital and Lightspeed Venture Partners are also backing Oyo China significantly. Oyo China’s cap table will mirror its India shareholding pattern with SoftBank being the lead investor.
Of the $1 billion that the company has raised in the current round, Oyo has earmarked $600 million towards its operations in China, with the rest directed towards hiring and other overseas markets such as south-east Asia and the UK.
Earlier this month, Oyo reported a more than three-fold jump in revenue for its India operations during the 2018 financial year. The company earned revenue of Rs 416 crore, up from Rs 120 crore in the year-ago period, attributing the rise in top line to a combination of increase in transactional and franchise fees it earns from merchants. It registered a marginal rise in net loss to Rs 360 crore from Rs 355 crore it had reported in FY17.
The company has projected a revenue of almost Rs 1,500 crore for the current financial year.
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