The head of Oyo Brazil said that the SoftBank Group is taking a direct role in managing its virus-hit hospitality start-up Oyo’s operations in Latin America through a joint venture which will control all hotels in the region.
SoftBank is the biggest investor in Oyo and would use part of its $5bn Latin America fund to invest in the newly formed company called Oyo Latam which will take over 1,000 hotels mainly in Brazil and Mexico, Henrique Weaver said on Friday.
Weaver mentioned that the both companies would have equal representation on the board, but did not say how much SoftBank would invest.
This move comes as when Oyo valued at $10bn in its most recent fundraising round and has been forced to cut costs and rein in its expansionist strategy in global markets by reducing its hotel footprint and laying off employees after revenues took a hit from the coronavirus pandemic.
It also shows that the Japanese investor’s keenness to ensure the Indian company remained on track, and was the latest sign SoftBank was more closely overseeing Oyo’s operations in markets including China, India and Japan, said three informed sources.
SoftBank had already taken the big writedowns on bets including shared office space company WeWork and wanted to avoid a similar fate with Oyo, in which it invested more than $1bn, said one of the sources who is directly familiar with SoftBank’s thinking.
An Oyo spokesperson said SoftBank was like any other investor in the company with a seat on the board and that Oyo was “a management-run and a board-governed company”.
“Any description that Oyo is being managed, or there is any ‘additional oversight’ (formal or informal) or otherwise is merely media speculation and completely untrue,” the spokesperson said.
SoftBank said it started the partnership with Oyo in Latin America in 2019, and the investment was formalised recently with the creation of Oyo Latam and the board. SoftBank’s Latam fund had invested $75m into Oyo’s business in the region, said a source with knowledge of the matter.
“Latin America has proved to be a good fit for Oyo, with a super fast growth pace because the hotel market is extremely fragmented in the region,” Weaver said.
Once among the world’s largest hotel chains by room count, Oyo has furloughed hundreds of employees in the US and Europe and shuttered offices in other global markets. In India and China it began cutting costs and headcount as early as January.
The lawsuits had resulted in some of Oyo’s bank accounts in China being frozen, but the company said that was a standard process and did not mean it was guilty.
“We are vigorously defending these allegations in court of law including disputes on the dues and claims,” the Oyo spokesperson said.
