Internet group Tencent has begun negotiations to invest between $300m and $500m in India-based short-term accommodation provider Oyo Rooms, Times of India reported yesterday.
The deal would value Oyo at $2bn according to two people familiar with the matter, more than double the valuation at which it last raised funding, through a $250m round led by telecommunications and internet group Softbank’s $93bn Vision Fund in September 2017.
Oyo operates a network of branded rooms with standardised facilities in partner hotels spanning 230 Indian cities, providing a platform from which to book them on its app and website.
The company has also expanded into Tencent’s home country of China, which is currently responsible for 90% of its foreign business, Malaysia and Nepal, and its overseas bookings now make up 15% to 20% of its overall revenue.
SoftBank was reportedly in talks with Oyo in March this year to invest $500m to $800m, and sources told TOI Oyo is also speaking to undisclosed Chinese and financial investors over participation in the upcoming round.
One source said: “The company is engaged with Tencent, and a term sheet is likely to come in. There’s a bunch of other investors also in talks, but those are preliminary at the moment. The fundraise is largely to grow the China business.”
The company has raised almost $440m so far, and insurance and aerospace component firm Hero Enterprise, Lightspeed Venture Partners, Sequoia Capital and Greenoaks Capital also contributed to the 2017 round, which valued it at between $850m and $900m.
The latter three, like Venture Nursery, were early backers of Oyo and took part in its $100m series B round, which was led by SoftBank in 2015, before the corporate added $62m in funding the following year.
China Lodging Group provided a further $10m of funding for Oyo in September 2017. SoftBank currently owns a 42% stake in the company, according to TOI.