Exclusive: Treebo kicks off Series D round with a haircut in valuation

In what appears to be a Series D round by existing investors, budget hotel brand Treebo’s valuation has been discounted by nearly Rs 100 crore. This comes as hospitality and travel startups have been massively hit by the Covid-19 pandemic — most of them unable to make money and looking for ways to extend their runway. 

As per regulatory filings, Treebo has allotted 1,878 series at Rs 1,19,853 per share to Bertelsmann BV, SAIF Partners, and Matrix Partners. Price per share of Treebo has dropped down by 23% from Rs 1,55,741 to Rs 1,19,853 in this funding tranche. 

According to Fintrackr, the estimated valuation of Treebo has been reduced by around 16% to Rs 513 crore. 

Striving for funds the company had raised Rs 3.25 crore in January from Bennett Coleman & Co. Limited (BCCL). It had allotted 5 share warrants along with an equity share priced at Rs 1,55,741 to BCCL, at a valuation of around Rs 580 crore (Rs 608 crore upon conversion of warrants). 

In the current series D round, each of the three investors has acquired 626 shares by infusing an equal amount — Rs 7.5 crore. We believe this is an ongoing round and new investors Vermillion Peak Master Fund and Kart Arst Peak Asia Master Fund are likely to join the Series D round.

Post investment, SAIF Partners will hold 18.301% stake while Matrix Partners has a 15.083% ownership in the Bengaluru-based company. 

Treebo’s down round reflects the way in which funding is expected to continue in the coming months especially in the hospitality sector where businesses have come to a grinding halt since mid-March. 

“Haircut in Treebo’s valuation is natural and it’s going to be the same for others in the hospitality sector. Valuations are bound to come down as chances of finding new investors are slim. Even existing investors are willing to put in follow-in money only in selective companies in their portfolios,” said one of the managing partners of a VC firm requesting anonymity.

Treebo hasn’t had an easy journey. The company last raised a large sum of money in 2017 when Hong Kong-based hedge funds led a $34 million round. Following that, the firm has held discussions with investors but talks haven't materialized. In order to curb costs, Treebo started trimming its workforce last year and had another round of layoffs earlier this year. 

After three months of lockdown, the government had issued a 31-point advisory for hotels and restaurants to restart their operations. Budget hotel brands such as Oyo, Treebo, FabHotels are expected to see some business in the coming weeks. However, they will take months from here to reach pre-COVID-19 scale. The current series D round could help Treebo refuel its business which has been in need of cash for a while now.