(This story originally appeared in on Apr 24, 2017)

MUMBAI: Oyo Rooms is closing a $250-million, or Rs 1,625-crore, financing round led by its existing investor SoftBank, after which it will be valued at $850 million, three people familiar with the matter said.Post-money valuation is the worth of a company after the investor capital is infused. The size of Oyo's latest funding round is half of the $500 million proposed by the Masayoshi Son-led SoftBank earlier this year, as reported by TOI in its February 27 edition.The online hotel booking platform has not been able to get any new outside investors since the time SoftBank came on board in 2015.This latest fund-raise will give an almost 42% ownership to the Japanese internet and telecom group up from the 27% it holds currently in the company, sources said.Early investors in Oyo opposed the mammoth $500-million proposed funding by SoftBank since it would have diluted their shareholding and given more than 50% control to the Japanese group."Seeing what has played out at Snapdeal, many early investors are wary of SoftBank taking large ownerships in their portfolio companies. But Oyo hasn't been able to shore up capital from external investors, which is why they have opted for half of what was committed by SoftBank," a person privy to the transaction said on the condition of anonymity.Oyo's early investors include Lightspeed Venture Capital, Sequoia Capital and Greenoaks Capital, among others. The investment in Oyo will come through the newly launched $100-billion SoftBank Vision Fund, which is eyeing opportunities in technology ventures globally. While SoftBank is expected to put about $225 million, the rest of the amount will come from the other existing investors.An email sent to Ritesh Agarwal, founder & CEO, Oyo Rooms, did not elicit a response till the time of going to press. A SoftBank spokesperson said, "We do not comment on portfolio companies and especially around fund-raising efforts. We are very happy with Oyo's progress in general and commend the team."In India, Softbank has been consolidating its position after having taken bets on a bunch of consumer internet companies between the heady years of 2014-15 and putting about $2 billion across these startups.As reported first in our March 29 edition, Softbank is in discussions to orchestrate the sale of e-commerce platform Snapdeal, where it is the largest investor, to its bigger rivals Flipkart. We also reported the Japanese group was looking to back payment firm Paytm, choosing to invest behind the sector leaders.Oyo may still be trying to get an external investor to come into this round, a source said. The hotel aggregator had previously held talks with strategics but those discussions did not materialise into a deal.The hotel aggregation segment in India has gone through consolidation post a slug of capital coming into companies like Oyo and the Tiger Global-backed Zo Rooms, which shut down last year.Presently, a set of smaller players like Treebo Hotels and Fab Hotels compete with the market leader besides the online travel agents (OTAs) like the Makemytrip and Goibibo combine.OTAs have been allocating increases investments wanting to make a dent in the hotel aggregating space as margins they draw from airline bookings is half of what they make on hotel bookings. Recently, Treebo Hotels delisted from MMT saying the commission charged by the OTA was too high.For Oyo, what's worked so far is its scale and the constant capital it has been able to rack up compared to its rivals. Over the past year, it has been able to prune its margins from being negative 27% to 15%, two people familiar with the company's financials said.The current fund raise is going to go towards expanding its reach further and growing new formats like Oyo Townhouse for which the company is forging partnerships with property developers.Townhouse leases properties and services them for better customer experience in a move to fix quality issues, which emerged as a big concern for the hotel aggregator after it scaled up its inventory indiscriminately over the past two years while fighting competitors. Oyo is also looking to expand outside India and is expected to use the freshly raised capital towards it.