OYO, the Indian hospitality giant preparing for an IPO, turned profitable in the financial year 2023-24 (FY24) by streamlining its operations and cutting costs. The company posted a net profit of INR 229.5 Cr for FY24, a stark reversal from the net loss of INR 1,286.5 Cr reported in the previous year. Last month, OYO confirmed this shift to profitability.

Revenue Performance and Growth  
Despite turning profitable, OYO’s operating revenue saw little change. The company's revenue from operations stood at INR 5,388.7 Cr in FY24, reflecting a slight decline of 1.3% compared to INR 5,463.9 Cr in FY23. While OYO’s hotel count grew to 18,103 by the end of FY24, up from 12,938 in the previous year, the company noted that new properties would take time to reach their full earning potential.

Total Revenue and Additional Income  
Including other income, OYO’s total revenue dropped by 1%, from INR 5,601.7 Cr in FY23 to INR 5,541.5 Cr in FY24. Although the decline was marginal, it highlighted the company’s challenge in increasing top-line growth while focusing on profitability.

Cost-Cutting Measures and Expenditure  
A significant reduction in OYO’s overall expenses was crucial to its profitability. The startup reduced its total expenditure by 16%, bringing it down to INR 5,725.7 Cr in FY24 from INR 6,799.6 Cr the previous year.

Lease Costs  
Lease-related expenses made up the bulk of OYO’s spending, accounting for 46% of the total costs. These expenses, which included lease rentals and service leases, fell by 8%, from INR 2,843.3 Cr in FY23 to INR 2,629.5 Cr in FY24.

Employee Costs  
OYO’s most significant cost-saving measure was cutting employee-related expenses. The company reduced its employee costs by 52%, from INR 1,548.8 Cr in FY23 to INR 744.3 Cr in FY24. This reduction was mainly driven by a steep 71.3% drop in employee share-based payments, which fell to INR 180.6 Cr in FY24 from INR 630.3 Cr the previous year.

Finance Costs
Contrary to other cost reductions, OYO’s finance costs increased by 24% during the year, rising from INR 681.5 Cr in FY23 to INR 843.8 Cr in FY24. The rise in finance expenses reflects the company’s increased financial obligations.

Future Profitability Targets  
OYO’s founder and CEO, Ritesh Agarwal, recently shared that the company is aiming to triple its profit after tax (PAT) to INR 700 Cr by FY25. The company is positioning itself for sustained growth and profitability as it eyes a public listing.

Recent Fundraising and Valuation Decline  
In recent months, OYO raised INR 1,457 Cr (around $175 Mn) in a down round led by Singapore-based Patient Capital, a firm floated by Agarwal, along with J&A Partners and ASK Financial Holdings. This round of funding lowered OYO’s valuation to $2.37 Bn, down from its peak valuation of $10 Bn in 2019. This fundraising also included INR 417 Cr raised in July from InCred.

IPO Delays and Future Prospects
Although OYO has long been preparing for an IPO, its public listing has been delayed multiple times. Sources suggest that the IPO timeline may be further pushed back as the company awaits refinancing terms for the $660 Mn Term Loan B, which was used by Agarwal in 2019 to repurchase shares from investors.

 
Founded in 2012 by Ritesh Agarwal, OYO has grown into a global hospitality brand, offering over 40 products and services across more than 157,000 hotel and home storefronts in over 35 countries. As it navigates the complexities of a public listing and fluctuating financial circumstances, the company remains focused on increasing profitability and scaling its operations.