The year that began with an inflow of high amounts of VC money into the Indian startup ecosystem is concluding with several top startups laying off a chunk of its workforce.
After Paytm and Ola, hospitality startup OYO is all set to lay off about 500 employees in India, according to multiple sources aware of the company’s plans.
This comes just weeks after the SoftBank-backed company announced the appointment of a new CEO.
“About 5% of the total workforce in India will be impacted by the ongoing layoff drive,” said one of the people cited above, requesting anonymity. “Over 400 employees across the partner-facing experience team and business development functions will lose their jobs.”
OYO has around 10,000 to 12,000 employees on its payroll, added the people.
Earlier this month, OYO appointed Rohit Kapoor as the new CEO of India Southeast Asia replacing Aditya Ghosh who was elevated to a board position at the company. That said, the above-quoted sources say that downsizing of the workforce has been in the works for a few months now.
Employees who are asked to leave are being offered standard two months of severance pay, according to one of the sources mentioned above.
“Among the top priorities for Kapoor was to execute the layoff plans,” added a third source cited above. “The layoffs are in line with its strategy to curb expenses and bring efficiency in the aforementioned departments. Soon other departments may also go through a similar downsizing exercise.”
Responding to Entrackr queries, OYO spokeswoman said, “OYO continuously tracks performances of the individuals and depending on the results (a grading based system) and the individual’s interests, we may replace some candidates after allowing them to go through a performance improvement programme.”
Some of the people cited above also said that in cities such as Hyderabad, Mumbai and the national capital region, some of the teams including the partner-facing experience team are being demolished and its members are being absorbed into the business development (BD) team. Something similar may happen to other teams as well.
“This is another way for them to get rid of people,” said a former employee at OYO, requesting anonymity. “When I was at OYO a year ago, they weren’t as strict, but now if a new employee doesn’t meet the target within a few months, he or she may ask to be relieved.”
According to sources, OYO has divided its employees into four categories across the two departments, as mentioned above. Employees who are under the last two categories are being considered as under-performers, and the company plans to either absorb them into the BD team or ask them to leave.
After an enormous loss from investments in Uber and WeWork, SoftBank has reportedly changed its strategy. Unlike in the past where it mandated investee companies to chase growth at any cost, it’s now asking them to go for a sustainable path and maintain high corporate governance.
“The Indian portfolio companies were in a meeting with Masayoshi Son recently where he asked them to focus on profitability — something that was never a topic of discussion in the past,” said a person familiar with the meeting.
Significantly, two of the largest SoftBank’s bets in India — Paytm and Ola had slashed over 1,500 employees together. While Paytm fired more than 500 staff members at mid and junior levels, Ola downsized its workforce by 20% impacting 1,000 people.
