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OYO Looks To Raise Fresh Funds Via Venture Debt Financing Route | #VentureCanvas

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Bhumika Khatri | Inc42

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Gurugram-headquartered hospitality chain OYO is reportedly looking to raise fresh funds via venture debt to double down on its Townhouse property vertical in India this year.

The company is said to be in talks with several venture debt firms and some of the top private banks to raise several hundred crores in debt financing.

OYO had recently closed its $1 Bn funding round, amid its plans to rapidly scale up international operations and Indian verticals.

Push To TownHouse: Why Now?

Ritesh Agarwal-led OYO has been bullish on Townhouse, which was launched in January 2017. Townhouse properties, owned and fully managed by OYO, have played a key role in improving the startup’s image with customers.

A venture debt investor reportedly said, “When they started with the marketplace, they didn’t need any leverage at that point. But once they got into Townhouse, there was a need for investing into the properties, which made them turn to debt financing.”

The focus on Townhouse comes as the equity and preference funding will go mostly to its overseas ambitions and out of which, $200 Mn has been committed to India recently. OYO currently has more than 173K rooms spread over 259 cities in India. Internationally, it is operating in 500 cities spread across nine other countries with half a million rooms listed.

The company is now aggressively pursuing its plan to become the world’s largest hotel chain by 2023 and becoming the dominant hospitality player in India and South Asia.

This is in line with OYO’s strategy to expand and capture as much of the opportunity in existing markets, while also identifying new markets where it can meet the demand-supply gap to make the most impact.

Startup Applications Increases In Venture Debt Market

It is interesting to see here that as a company with access to large funds, OYO has chosen venture debt route along the lines of players such as Swiggy, BigBasket, Raw Pressery and Byju’s.

On the back of the strong equity funding environment, venture debt market also saw impressive growth, as more and more startups use venture debt, as an alternate source of capital. It is seen as a smart way for startups to raise some additional capital to drive growth while optimising their capital structure & dilution for founders and early-stage investors.

It was speculated that startups will raise between INR 1500-1800 Cr of venture debt in 2019, which will be a healthy 25-30% growth over 2018.

Talking to Inc42 earlier, Vinod Murali of Alteria Capital said that Alteria has noticed a strong demand for venture debt, much better awareness about the product, a lot more chatter and curiosity around how can this fit into the capital strategies of companies.

As India continues to attract major investor attention, investment firms that are banking on the country’s growing venture debt market include Temasek-backed Innoven Capital, Trifecta Capital, and IntelleGrow among others.

[The development was reported by Livemint.]

The post OYO Looks To Raise Fresh Funds Via Venture Debt Financing Route appeared first on Inc42 Media.

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Source: OYO Looks To Raise Fresh Funds Via Venture Debt Financing Route

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