In an email sent to its employees, CEO Ritesh Agarwal cleared the air around recent firings happening in the company and also laid out his plans and strategies for the year 2020.
Indian hospitality start-up OYO has been in hot waters for quite some time now with backlashes from hotels for alleged unfair practices and deep discounts. Arguably the poster boy of the Indian start-up ecosystem, Ritesh Agarwal has made a mark for OYO in the world with operations in about 80 countries. In just 6 years, the start-up has witnessed massive growth and business expansion. Currently valued at $10bn, OYO has a portfolio of more than 35K hotels and 125K vacation homes and over 1.2 Mn rooms across 800 cities. But it doesn’t seem that their troubles are getting over soon. In the past few months, OYO has managed to gather a different spotlight on itself with a New York Times report on its toxic work-culture, IT raids at their Gurugram headquarters and death of a sportsperson in one of their properties last year. Adding to troubles, came the firing of thousands of its employees from China and India business.
OYO has been the star kid in SoftBank’s portfolio, along with Uber and WeWork, but after the latter’s IPO debacles, the investing giant has tightened its noose on the hospitality start-up. SoftBank has been constantly controlling the hospitality company’s business dealings and has given a deadline of March 2020 to phase out loss-making contracts. Although founder Ritesh Agarwal has maintained his stand of not going public soon, SoftBank wishes to list OYO publicly in the US by 2023. It is however been observed that OYO is working on meeting the deadline to turn itself profitable. OYO reported a net loss of ₹2384.69cr in FY19, this is a 5.5X jump from its losses of ₹360.42cr in FY18. Their annual report also showed that their expenses in FY19 increased by 3.9X while revenues witnessed a high of 3.5X.
SoftBank has also given OYO a deadline for July 2020 to turn positive EBITDA of its ancillary businesses. These businesses include Weddingz.in which OYO acquired in 2018. SoftBank’s idea is to shut down businesses that do not report an operating profit before end-July. The deadline for turning OYO’s self-operated businesses like TownHouse, Homes and SilverKey EBITDA positive is set to March 2020. These are nearly over 800 properties, where it reportedly makes investments with leasing arrangements with the owners of the properties. It is, however, worth noting that about 8,000 hotels that Oyo runs under franchised arrangements are not a part of these deadlines.
Last week, OYO had laid off about 1000 of its employees from its India and China business as a part of restructuring the company model. Although OYO had previously declined speculations of these layoffs stating that they’re only terminating contracts of the employees who failed in its performance-based evaluation system, founder Ritesh Agarwal on Monday cleared the air around it with a mail sent to his employees. In the mail, sent to “OYOpreneurs” the 26-year old CEO said, “I have no hesitation in admitting that growing at the pace at which OYO has in the past few years, we sometimes went ahead of ourselves and pressure-tested our organization at multiple levels. This year, we are taking steps to address this.”
“Every Oyopreneur is important to Oyo and ensuring their well-being both during and after their tenure is our number one priority. I want to thank them for their efforts and apologize for the impact this is causing.” He further added, “We are asking some of our impacted colleagues to move to a new career outside of Oyo. This has not been an easy decision for us.”
These layoffs come after a New York Times report regarding the “toxic work-culture” at OYO highlighting other issues like unlicensed hotels and guesthouses. After the report surfaced, Ritesh had written an email to the senior leadership stating that the company has a different view of reality against the view projected in the article.
“Without going into ‘why’ we would rather focus on ‘what’ has been said and take the opportunity to introspect and come out stronger … we are acutely aware of the responsibility we carry on our shoulders and know that the world is watching us and we have to rise up and prove over a period of time that a young company out of India can truly make a mark on a global platform as a well-run enterprise,” Ritesh said in the mail.
In his Monday mail to employees, Ritesh even laid out his plans for the future of the company and targets for 2020. “One of the implications of the new strategic objectives for 2020, is that, like the leadership team, Oyo will reorganize more teams across businesses and functions,” he said. He further added, “The strategic objectives of the company are: sustainable growth, operational and customer excellence, profitability, and training and governance.” “And this means that, unfortunately, some roles at Oyo will become redundant as the company further drives tech-enabled synergy, enhanced efficiency and removes duplication of effort across businesses or geographies.”
Apart from OYO, many other companies under the SoftBank umbrella have been feeling the heat of the investing giant’s constant pressure. Pizza-making robotic company Zume Pizza, car-sharing platform Getaround and delivery company Rappi have also laid off employees last year. Collectively, SoftBank companies have axed more than 10k jobs in just a few months.
OYO is currently the second most-valued startup at $10-billion valuation following Paytm’s $16 billion with SoftBank CEO Masayoshi Son being the common heavyweight investor.
Sandeep is a journalism and mass communication graduate with a keen interest in politics and business. He is a part of Research & Content team at HrNxt.com.