India’s OYO: China Expansion Came At Great Cost

Losses widened this past year for OYO Homes & Hotels, as the SoftBank-backed company tried to expand into China, according to Reuters.

The losses the company reported were increased sixfold since March 2019. This comes after recent news about OYO having to lay off around 2,000 employees in India. The company hasn’t been profitable yet, and SoftBank itself — which owns about 46 percent of OYO — has reported sluggish returns lately.

The quarterly profit for SoftBank was almost decimated by its Vision Fund losses, worth $100 billion. The firm also recently had to bail out WeWork, which had losses of its own.

The consolidated net loss after taxes for OYO came to $335 million this past year, up considerably from the near $50 million loss in the year prior, according to business intelligence firm Tofler.

OYO expanded heavily into China in 2018 and 2019, making that country its second-largest market behind India. In a statement, OYO attributed its losses to the state of things in China and elsewhere in the world, as these “markets were in development and investment mode” while OYO made its moves. This contributed to about 75 percent of the losses, the company said.

The company added that its gross market in India improved year over year, going from $211 million to $951 million.

Rohit Kapoor, OYO CEO for India and South Asia, said the company had changed its method for evaluating revenue. It previously accounted for revenue on a net basis, using net realizable value as a key metric, which represented the total value paid by guests. Now, though, it has switched to using gross basis, measuring revenue by a net of taxes and loyalty discounts.

OYO’s revenue was previously reported to be $58 million for the year ending in March 2018. However, its new calculation showed the revenue as $211 million.

Internal projections from OYO showed that it may not end up making a profit in India and China until 2022.