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Microsoft is considering an investment in the hospitality industry.
The computer and software giant is in advanced talks to invest in India-based, Airbnb-backed hotel operator Oyo, Tech Crunch reports. Microsoft's timing in seeking to purchase a minority stake could be an attempt to buy in before Oyo attempts an initial public offering, Reuters reports.
Part of the deal could involve Oyo switching to using Microsoft's cloud computing services, Tech Crunch reports.
Oyo expanded rapidly in the latter half of the previous decade, thanks in part to heavy investment by SoftBank Group's venture capital-focused Vision Fund, which pushed its valuation as high as $10B. Like the rest of the hospitality industry, Oyo saw a precipitous drop in revenue over the past year, causing it to lose as much as 60% in value, founder and CEO Ritesh Agarwal told Bloomberg TV.
Even before the coronavirus pandemic started disrupting economies worldwide, Oyo was recalibrating after a report exposed a series of legal troubles, "toxic" workplace environment allegations and unsavory business practices plaguing the company during its SoftBank-driven expansion. Late last year, SoftBank wrote down Oyo's value to $3B in its investment calculations, Financial Times reports.
In December, Agarwal claimed that the company had $1B in cash reserves to hold it until an IPO, Bloomberg reported at the time. Oyo's reserves were down to $800M or less a few months into this year, and it cut its spending drastically in recent months, Agarwal said at a virtual conference reported by Tech Crunch, claiming that the company's "monthly burn" is down to around $5M.
In the past couple of months, Oyo raised $660M in new debt to pay off a previous loan, Tech Crunch reports. The terms of the new loan reportedly include an option to convert it to equity.
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