business

Updated: Apr 12, 2016 12:46 IST

At a time when venture capitalists and angel investors are reluctant to park their money in Indian startups, Oyo Rooms has raised $100 million in its fifth round of funding.

The hotel rooms aggregating platform has raised the money from existing investors, including Japan’s Softbank, and an international sovereign fund, a person with knowledge of the deal said. Other investors are Sequoia Capital, Lightspeed Venture Partners, Greenoaks Capital, DSG Consumer Partners and Venture Nursery.

“The term sheet has been signed and the company is looking at expanding its operations domestically,” the person said.

In the three years since it was founded, Oyo has emerged as the largest aggregator of hotel rooms in India. It has 65,000 rooms in 5,500 hotels across 177 cities. The company has already raised a total of $125.65 million in four rounds earlier. It recently acquired rival Zo Rooms, which made almost similar revenue, and was funded by Tiger Global.

The business of hotel aggregation is not new, but the entry of players such as Oyo and Zo have also got incumbent online travel agencies, including Makemytrip, Cleartrip, Expedia and Yatra, worried. In the past six months, there has been a lot of focus on hotel business since the margins are higher compared to what they earn from selling flight and train tickets.

Oyo typically picks up 10-15 rooms in an existing budget hotel, refurbishes them, standardises the look and feel, and ensures quality a tad better that what the hotel gives.

In January it launched its Malaysian operations. In India, the company will focus on “pockets of profitability”, the person added. For example, ahead of the Mahakumb festival, Oyo has ramped up its inventory in holy city of Ujjain.

The hotel booking industry has an online penetration of just 15%, and the budget hotel business is worth $20 billion. This gives Oyo a lot of headroom.