By
Godfrey Benjamin
April 18th, 2024
The sources who unveiled the potential deal between Microsoft and OYO said there is the possibility that the hotel chain is likely to switch its database to Microsoft’s cloud services.
American software and cloud services giant Microsoft Corporation (NASDAQ: MSFT) is reportedly in advanced talks to invest in Indian startup OYO. According to a report by TechCrunch, the Microsoft and OYO deal may be concluded as early as Friday, July 30th, with the investment amount undisclosed.
OYO, renowned as one of India’s most iconic startups plies its business by aggregating budget hotels for booking around the world. Founded by Ritesh Agarwal in 2013, the company has enjoyed steady growth since its inception, however, its growth was tried by the outbreak of the coronavirus pandemic. Recounting the negative impacts of the pandemic, Agarwal who doubles as the startup’s Chief Executive Officer told Bloomberg TV that COVID-19 hit the firm like a “Cyclone.”
“We built something for so many years and it took just 30 days for it to drop by over 60%,” he added.
The ensuing lockdowns brought about by the COVID-19 pandemic disrupted the bookings on OYO as much as it affected other areas of its business. The startup’s cash balances which were sitting at $1 billion at the end of December 2020 have trimmed to values between $780 million to $800 million as Agarwal noted at a virtual conference recently. Additionally, the CEO said the firm had pared its “monthly burn” across all businesses to $4 million to $5 million.
The implication of this financial strain was also reflective in the massive job cuts the firm enforced to help cushion the impacts of the pandemic. Beyond the pandemic, OYO’s growth trend in recent years has been flattened by a sour relationship with hotel owners, as well as a “toxic culture,” including a lapse in governance. The pandemic has made working on these shortcomings more difficult for the firm.
The Microsoft Deal with OYO: Sketchy Details
The sources who unveiled the potential deal between Microsoft and OYO said there is the possibility that the hotel chain is likely to switch its database to Microsoft’s cloud services. The Microsoft deal could help reposition the startup on the path of growth, as Softbank Group Corp (TYO: 9984), the company’s largest investor has started trimming its position in recent times.
The deal could also be a precursor to a public listing plan according to broad speculation. However, CEO Agarwal said that the firm had not made any decision on exploring the public markets.
In order to keep its balance sheet afloat, OYO said it had raised as much as $660 in a debt offering to service previous debts. The terms of this latest debt involve an exchange of equity at a later date as sources close to the matter told TechCrunch. With potentials being seen in the Indian/Asian market, confirmation of the Microsoft-OYO deal will help cement the pursuit of the American tech giant which has backed other startups including DailyHunt, FlipKart, and Software as a Service provider, FarEye in recent times.