Oyo, previously valued at $10 billion, is now seeking new funding at a significant discount of 70%

Oyo, the Indian budget hotel chain startup, is in negotiations with investors to secure a new round of funding, with the potential to lower the firm’s valuation to $3 billion or less, according to three sources familiar with the matter.

The startup is in discussions with investors, including Malaysia’s sovereign wealth fund Khazanah, for the new funding round. This round may involve secondary transactions, potentially valuing the startup at as low as $2.5 billion.

If these terms materialize, it would represent a significant decrease from Oyo’s peak valuation of $10 billion in 2019. It would also be lower than the total capital Oyo has raised through equity and debt financing over the years.

The potential valuation cut is not entirely unexpected. In 2022, SoftBank, which owns over 40% of Oyo, internally reduced the startup’s valuation to $2.7 billion. Oyo disputed this markdown, stating there was no rational basis for it.

Oyo, backed by investors such as SoftBank, Airbnb, Peak XV Partners, and Lightspeed Venture Partners, has refuted rumors regarding its valuation and funding discussions. The company emphasized its focus on improving performance and earnings.

These funding deliberations come after Oyo withdrew its draft red herring prospectus for an initial public offering (IPO) for the second time. The startup initially filed for an IPO in 2021 but has not received approval from India’s market regulator, SEBI.

Oyo’s founder and CEO, Ritesh Agarwal, reportedly informed employees that the company anticipates revenue for the fiscal year ending in March to exceed $682 million.