Oyo warns of delay in profitability; Strengths and weaknesses of the startup Ipo-Bound
Here are some of the main strengths and weaknesses of OYO Rooms, as mentioned in its draft prospectus on red herring (DRHP) filed with the market regulator SEBI:
OYO has suffered net losses every year since its incorporation, and its “ability to achieve profitability may be delayed”. The company said its “profitability depends on our ability to maintain a profitable platform, primarily driven by effective management of benefits and other expenses.”
It may not continue to grow at the rate of historical rates and may face difficulties in executing its expansion plans and implementing growth strategies, according to the DRHP.
The business has debt that requires interest and principal payments. As of July 31, 2021, its total consolidated outstanding amount was Rs 4,890 crore.
The Company’s limited operating history makes it difficult to assess its future prospects and the risks it may encounter in an uncertain global economic environment.
OYO relies on third party distributors, travel management companies and distribution systems, which can affect its margins and profitability. “We can also lose access to certain distribution channels if these third-party distributors see us as a competitor and choose to remove us from their platform,” he said.
OYO’s activity may be affected by:
Travel industry challenges such as extreme weather conditions, natural disasters, pandemics, changes in trade or immigration policies and downturns
OYO’s spending slashed 68.6% year-on-year to Rs 6,936 crore in FY21 as many of its employees switched to a work-from-home mode due to the pandemic . This has allowed OYO to streamline various expenses such as office rental, utilities and travel costs.
According to the DRHP, it also saved money by negotiating rate reductions between supplier contracts to optimize its technology costs, insurance spending and other variable costs.
OYO expects the coronavirus crisis and associated restrictions to continue to hurt its business financially and operationally in the long term. The extent to which COVID will further harm its business is “uncertain and cannot be predicted,” he said.
Negative publicity could damage the company’s brand and hinder its ability to compete effectively. Maintaining and improving its brand and reputation are essential to its growth, according to the DRHP.
Here is an overview of the main factors affecting the activities of OYO, as mentioned in the draft documents:
GBV is the gross value of the reservation
Here is an overview of OYO Rooms finances:
Figures in crore rupees
OYO’s total income in FY21 fell 69% to Rs 4,157 crore due to the fallout from the pandemic.
(Edited by : Sandeep Singh)