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Oravel Stays, the parent company of Oyo, is on the cusp of achieving its inaugural net profit in the current fiscal year's second quarter. This encouraging projection comes directly from Ritesh Agarwal, the founder and CEO of Oyo, conveyed via email to the company's top leadership. Agarwal anticipates that Oyo will post a net profit of over Rs 16 crore in the July–September quarter, a significant milestone in the company's journey. These developments are taking place as Oyo diligently prepares for an imminent initial public offering (IPO), signalling the company's maturation and financial strength.
Furthermore, Oyo is poised to conclude the current fiscal year with an impressive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of Rs 800 crore. This is a remarkable threefold increase compared to the Rs 277 crore reported in the preceding fiscal year. In the email that has recently come to light, Agarwal shared several key financial highlights for Oyo. According to him, Oyo generated robust revenue from operations, totalling Rs 5,463 crore in the fiscal year 2023. This figure represents a commendable 14 percent surge compared to the previous fiscal year. Concurrently, Oyo has taken significant strides in narrowing its losses, which have been reduced to Rs 1,286 crore.
One notable metric that has garnered attention is Oyo's adjusted gross profit margin, which concluded FY23 at an impressive 43 percent of total revenue. The adjusted gross profit itself surged to Rs 2,347 crore, signalling a robust year-on-year increase of 23 percent. In recent years, Oyo has strategically focused on operational efficiency and cost optimization. This strategy involved reducing headcount and scaling down operations in various regions. During the previous fiscal year, Oyo shuttered over 5,000 hotels and streamlined its portfolio to 12,938 hotels.
Agarwal elaborated on this strategy, emphasizing its aim to refine the hotel network by retaining properties that seamlessly align with Oyo's tech-enabled, monthly revenue optimization operating model. Oyo's global expansion ambitions extend to growth markets like the United States and the United Kingdom. While the company already maintains a presence in European countries, operating under brands such as "Belvilla by Oyo," Oyo's strategic endeavours have extended to the acquisition of vacation rental firm 'Direct Booker' for $5.5 million. This acquisition added 3,200 homes to Oyo's expansive platform.
Oyo continues to dominate the hotel landscape in India and Southeast Asia. Notably, the overall gross booking value for Oyo surged by 25 percent to approximately Rs 10,000 crore in the last fiscal year. A significant portion of this figure, Rs 6,172 crore, was attributed solely to the hotel business, underscoring a remarkable year-on-year growth rate of 35 percent. Fitch, the credit rating agency, had previously forecast substantial growth in Oyo's EBITDA for FY24. This bullish outlook was grounded in several factors, including a rebound in demand within the travel industry, Oyo's steadfast gross margins, and a reduction in operating expenditures.
The vibrant Indian hotel sector thrives on a robust business travel environment and a flourishing meetings, incentives, conventions, and events (MICE) segment. The fiscal year ahead is anticipated to benefit from major events such as the G20 presidency and the ICC Men's Cricket World Cup, further bolstering the demand for hotels. Oyo's promising future is driven by prudent financial measures and strategic expansion into new markets, paving the way for profitability.
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