25-Year-Old Founder Spends $2 Billion to Triple Stake in Oyo

(Bloomberg) -- Oyo Hotels and Homes founder Ritesh Agarwal will invest $2 billion to triple his stake in the SoftBank-backed Indian lodgings startup he established in his teens.

Agarwal will buy shares from existing investors Lightspeed Venture Partners and Sequoia India, which will remain backers of the startup, the company said in a statement. The deal will value Oyo at about $10 billion and raise Agarwal’s slice of the company to 30% from about 10% now, people familiar with the matter said, asking not to be identified discussing a private transaction. The entrepreneur won support from banks and other financial partners for his deal, Oyo said.

That valuation makes Oyo one of India’s most valuable startups, ranking after One97 Communications, the parent of digital payments pioneer Paytm. E-commerce giant Flipkart Online Services Pvt was acquired by Walmart Inc. last year in a $16 billion deal. Oyo, which provides accommodation to travelers from India and China to the U.K. and U.S., grew revenue more than four times in June from a year earlier. It now has a million rooms under its brand, of which more than 200,000 are in India.

Agarwal founded the startup in his teens after dropping out of college and roaming India on a shoestring budget. The wild, erratic standards at hotels and guest houses he encountered inspired him to start the online service, and the brand now aims to provide travelers a consistent experience.

Oyo mainly signs on hotel owners and then helps them upgrade everything from bathroom fittings to furniture and bedding, and then provides them standardized supplies like sheets and toiletries, and support to train their staff.

It employs hundreds of people in the field who evaluate properties on some 200 factors, from the quality of mattresses and linens to water temperature. To get a listing, along with a bright red Oyo sign to hang street-side as a seal of housekeeping approval, most hoteliers must agree to a makeover that typically takes about a month. Oyo then gets a cut of roughly 25% of every booking. Rooms usually run between $25 and $85.

“It is a very exciting time for Oyo right now as we make great living spaces come alive across all corners of the world from Texas to Tokyo,” Agarwal, who is also chief executive officer, said in the statement.

He will carry out the transaction, which requires shareholder and regulatory approval, through an entity called RA Hospitality Holdings (Cayman), Oyo said.

“We remain committed to supporting this world-class management team,” Mohit Bhatnagar, managing director of Sequoia Capital India Advisors, said in the statement.

(Updates with valuation and stake from the first paragraph.)

To contact the reporter on this story: Saritha Rai in Bangalore at srai33@bloomberg.net

To contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Colum Murphy

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