OYO's Valuation Plummets Despite Turning Profitable

Wed, 26 Jun 2024

In a shocking turn of events, OYO has withdrawn its IPO papers and is now raising funds at a valuation of $2.5 billion, down 75% from its peak valuation of $10 billion in 2019. The company recently posted its first annual net profit of ₹100 crore, sparking questions about what led to the drastic decline in valuation.

OYO's initial success was attributed to its focus on offering affordable hotel options with great service. However, over time, the company began to compromise on quality in its quest for affordability, leading to a loss of credibility among customers. The brand became synonymous with 'love hotels,' driving many away due to its tarnished reputation.

Despite this setback, OYO managed to turn profitable by prioritizing customer satisfaction and quality over market expansion. The company reduced its number of hotels, laid off employees, and exited unprofitable ventures to cut costs. Technological integration also played a significant role in bringing down operational expenses. These efforts ultimately led to the company's first fiscal net profit of ₹100 crore.

However, OYO's decision to focus on profitability may have inadvertently contributed to its declining valuation. Investors initially expected the company to continue growing aggressively, but OYO's reduced operations and profitability-focused approach may have disappointed them. The decline in valuation also raises questions about whether investors are no longer willing to bet on OYO's limitless potential, preferring instead to back more aggressive hospitality companies.

Published by Chronicles Of India. Scroll down to read more