After Innov8, OYO in talks to acquire Indian arm of Keys Hotels and serviced apartments

After recently starting operations in Texas, USA, India’s largest budget hotel chain OYO Rooms is in talks with Los Angeles based firm to take over their Indian operations.

Los Angeles-based Berggruen Holdings, a private equity and venture capital firm worth $2 billion, runs Berggruen Hotels in India under the branding of Keys Hotels.

The chain runs hotels and serviced apartments across 20 cities including Gurugram, Chennai, Mumbai and hill stations including Manali and Mahabaleshwar. Like OYO Townhouse, it offers a superior experience when compared to budget accommodation in a price range of Rs 3,000 to 4,000.

In the past few years, however, Keys Hotels has gone through a series of top-level exits and has been looking for buyers.

As per ET’s sources, the Ritesh Agarwal led firm has a lot of cash and is looking to spend it by investing in or acquiring co-working or co-living spaces.

It is already in the last leg of acquiring a co-working space Innov8 in a Rs 200 crore all-cash deal. Entrakr had exclusively reported about OYO's foray into co-working segment and the deal. 

Since Keys Hotels also operates service apartment, folding them up under OYO co-living brand could be another reason for OYO's interest in the acquisition.

Further, acquiring Berggruen Hotels’ India business will help the company make tie-ups in LA with a well funded US-based VC amidst an ongoing funding round. It can also be inferred that contacts with Berggruen can help OYO expand it’s business across the US, that it recently launched with a single property in Austin.

More than increasing inventory, this move can become a fruitful deal for several reasons including the aforementioned ones.

As far as inventory is concerned, OYO Rooms had 4.58 lakh rooms globally by the end of 2018 and the realised value run rate stood at $1.8 billion. The global stayed room nights saw a 4.3X year on year growth from 6 million in December 2016 to 75 million in December 2018, revealed OYO early this week through a press statement.

The company expects to earn revenue of over Rs 1,400 crore in FY19, a similar 3X growth as FY18. It also eyes a shrink in losses to head towards a unit economy based growth stage.