MUMBAI: China’s
Didi Chuxing is expected to invest in
Oyo Rooms — in what would be the ride-hailing giant’s second bet on an Indian startup after Ola, two people familiar with the matter said. The proposed investment is likely to be channeled into Oyo’s China business — which is growing rapidly having started in November last year.
As reported earlier, the Gurgaon-based startup is in the midst of closing a new $800 million- $1 billion financing round, which will split its India and China operations. Some investors like Didi and shared office startup WeWork have opted to only back the company’s Chinese subsidiary.
Sources said
Oyo is raising $500 million for its India business housed under Oyo Global, while the China unit is expected to rack up another $500-600 million. The current funding will value the domestic unit at $4.5 billion, after the investment, while the Chinese operations will be diluting 50% as it is expected to snag a valuation of about $1.2 billion. Oyo China was earlier a 100% subsidiary of its parent Oyo Global.
“Didi and WeWork are routing their investments through Oyo Global (the India business), but it is primarily for China. The overall funding could run up to $1.1 billion between the two countries,” said a person privy to the matter. Emails sent to spokespersons at Oyo, Didi Chuxing and SoftBank did not elicit a response.
SoftBank, which already holds around 42% in Oyo, will see a similar shareholding in the China subsidiary, sources said. Other existing investors on the company’s cap table or capitalisation table — like
Sequoia Capital and Lightspeed Venture Partners — are also backing Oyo China significantly. Having grown aggressively in mainland China, the company already runs 1,000 hotels in a mix of franchised and leased properties. Oyo China’s cap table will mirror its India shareholding pattern, with SoftBank being its leading investor.
Till now, the budget hotel brand has focused on tier-2,-3 and -4 markets in China, with an average price point of $20-25 per night. “For SoftBank, there are restrictions on its India ownership — where if they take majority control the group will have an obligation to buy out all shareholders. So the China restructuring is acceptable for all investors,” said another source. SoftBank first came on board Oyo in 2015 and has in all raised more than $400 million, largely by the Japanese group.
Most investors find China attractive because it is poised to become far more valuable for Oyo seeing the untapped opportunity in the branded hotel segment. Oyo had held discussions with other Chinese strategics like Tencent as we reported in our July 27 edition as it had been in talks to shore up new money. Those talks fell through as the valuation offered was about $2 billion.
China’s Didi Chuxing is expected to invest in Oyo Rooms
