Chinese internet behemoth Tencent is in advanced discussion to pump $300-500 million in budget hotel startup Oyo Rooms, according to people familiar with the matter. Although reports about Oyo aiming to raise fresh funds from SoftBank and other Chinese investors have been recently doing rounds, this latest unconfirmed report clearly stands out.
This is primarily because Tencent is likely to pump fresh funds in the Gurgaon based startup at market valuation of whopping $2 bn, which is more than double of its previous valuation of $850 Mn.
Sources claimed that if Tencent agrees to come on board, Oyo will use the latest capital infusion to expand its China business further. Sources further claimed that Oyo is also engaged in preliminary discussion with other investors.
After running a trial operation for several months, Oyo Rooms had officially announced its launch of operation in Mainland China few months back. Although a new entrant in the highly competitive Chinese market, the market reportedly contributes almost 90% of company’s international revenue. The Gurgaon headquartered company claims that it operates more than 11,000 hotel rooms across 26 cities in China.
Tencent’s backing may open huge opportunity for Oyo to encroach deep into the Chinese market, since the formed has a deep and vast network across the country.
Oyo is on aggressive mode to expand business
By all means, the Gurgaon based startup is going full throttle on business expansion front. Apart from venturing into foreign territories, it has acquired two startups in less than three months. The company acquired boutique hotel company Novascotia Boutique in March, which happened to be its first ever acquisition. This was followed by acquisition of IOT startup AbePlus last month.
Besides, Oyo has been in continuous news over reports that it is chasing existing investor SoftBank and other investors to raise fresh funds.
Oyo’s insistable appetite for business expansion and fundraising is understandable, since it operates in ruthlessly competitive market. Apart from competing with smaller players like Fab Hotels & Treebo, it has to compete with big payers like MakemyTrip, Goibibo, Trivago Clear Trip and many others.
It is probably owing to the ruthless competition that Oyo was forced to tweak its business model. Previously working only as a hotel aggregator platform, it has now also adopted franchise model in order to scale the business quickly.