9,111.90363.15
Stock Analysis, IPO, Mutual Funds, Bonds & More

Losses coming down by almost half in OYO's Indian market: Rohit Kapoor

OYO’s gross margin has improved from 10% to 14.7%: The real story is that the revenue is going from $221 million to $950 million plus. Rohit Kapoor, CEO-India & South Asia, and Aditya Ghosh, Board Member, OYO talk to ETNOW. Edited excerpts:

, ET Now|
Last Updated: Feb 17, 2020, 08.24 PM IST
0Comments
What's in store for OYO in 2020? CEO Rohit Kapoor and board member Aditya Ghosh decode
What's in store for OYO in 2020? CEO Rohit Kapoor and board member Aditya Ghosh decode
OYO loss has widened to $335 million. It is still a big loss but revenue has surged to $950 million. How would you look at it?
Rohit Kapoor: Global revenues have grown by 4.5x, India revenues are up by approximately 3x and the $335 million number that you spoke about, of that, India which is a mature market contributes $83 million out of that. Most of the losses have come from our investments in new markets, international markets and all of them have been in last year or late FY18.

Aditya Ghosh: The way we see our markets is that they go through three phases. There is the initial phase where you get into a market. The initial cost for people and establishment cost are higher. These are markets like the US, Canada, Latin America. Then the markets move to phase two, where you have created enough brand presence, consumer insight and you start seeing gross margin improvements.

These are markets like China and South East Asia. The great news is that more mature markets like India can see a clear path to profitability. So look at India, the losses have come down from 24% to 14%. It is 13.8% and you are seeing an expansion with revenues growing 2.9x. So, there is three times growth in revenues. But the best news is that we have seen our gross margin improve from 10% to 14.7%. As each market begins to mature, they are following a certain pattern.

Basically you have invested a lot more. You have increased your global footprint significantly and that is why you are seeing $335 million loss. It is still about one-third of your top line. Having said that, how will you achieve profitability? Is a breakeven possible this year at all? What is the goal for 2020?
Rohit Kapoor: We have spoken about it in the past as well. The path to profitability is very important for every business and country. However, there are businesses and geographies in different phases of the evolution and they will take their right amount of time to get to a profitable outcome. Over the last three months, we have said that in every business, every geography and every business line, we need to see a clear path to profitability. There is no hard deadline to it. The teams are working towards…

So is there no target this year for breaking even or being profitable?
Rohit Kapoor: No.

You have not given any guidance.
Rohit Kapoor: First of all, this is about FY19 results. In order to give any forward looking guidance on these things a) we as a private company are not obligated and b) I think it is not fair. But at a structural philosophy level, we have looked at every business and every geography. How do we get to a profitable outcome in this business in a reasonable amount of time? Every business is different, every geography is different. It takes time to mature. So the real story is that the revenue is going from $221 million to $950 million plus. India, which is a matured market, is seeing losses coming down by almost half.

And with margin expansion.
Rohit Kapoor: Absolutely.

Aditya Ghosh: In fact, in one of the first initial interviews almost about a year back, we had said that last year we have gone from 45% to 24% and we have tried to halve it again. That is what we have come through despite the expansion…

You did give guidance by the way…
Aditya Ghosh: But the world has changed in the sense we are now present in so many more different geographies. So to be able to give guidance where different parts are moving differently, (is not possible).

Also Read

Oyo founder, Ritesh Agarwal, to forgo pay for 2020

Oyo loss widens to $335 million

Oyo in talks with Delhi govt to offer quarantine rooms

Hyderabad hotel files insolvency plea against Oyo

Why is it hard for hotels to trust Oyo?

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service