Exclusive: Microsoft invests $5 Mn in Oyo at $9.6 Bn valuation

The deal between Microsoft and Oyo has been finalised. The US-based tech giant has invested $5 million in the SoftBank-backed hospitality firm, which is considered a strategic deal for both companies. At just 0.052% of the valuation, the sale is obviously small, but it might serve multiple objectives, including allowing key investors to report the same valuation on their books on the basis of this deal.  

As per media reports, the duo have chalked out a deal without disclosing much details of the transaction. The possible deal was first indicated about 3 weeks ago in the media, as a precursor to Oyo’s IPO. 

Oyo has kicked off Series F2 round and has allotted 5 equity shares and 80 preference shares to Microsoft corporation at an issue price of $58,490 per share to raise $5 million, regulatory filings show. Going forward, the company may receive more money from Microsoft.

A significant valuation jump 

According to Fintrackr’s estimates, Oyo has raised the fresh capital at a post-money valuation of $9.6 billion. The company was reportedly valued at around $9 billion when it raised over $7 million from Hindustan Media Venture Limited in March this year.

This jump in valuation can be validated with the surge in the share price of Oyo in the last two rounds. The company had raised Rs 5,611 crore or around $800 million in March 2020 at the share price of $51,555.1 per share. The share price has grown by  13.5% to $58,490 in the latest funding.

It’s worth noting that the Gurugram-based company’s valuation was dropped to $8 billion in August 2020 from $10 billion in November 2019, according to a report by Hurun. The report came amidst a sharp decline in the businesses of the hospitality sector due to the coronavirus pandemic. Oyo had to shut its non-performing businesses and went through layoffs and pay cuts during the period.

A strategic deal amid debt rounds

As per sources aware of the development, the deal may involve Oyo shifting to use Microsoft’s cloud services platform, Azure. The public cloud computing platform provides services such as analytics, storage, computing and networking.

While Oyo has not raised any larger equity round for a long time, the company has recently picked up $660 million in debt from global investors. Five months ago, it also raised $204 million in debt from SoftBank for its Singapore subsidiary Oyo Hotels (Singapore) Pte. Ltd.

Microsoft investment in tech companies in India

This is not the first investment for Microsoft in a tech company in India. The company had already invested in e-commerce giant Flipkart and last year it backed news aggregator Dailyhunt and logistics startup FarEye. It also runs its global Accelerator program in India, where it provides selected startups with a 14-week boot camp on running a firm successfully, besides getting them to use Azure. 

Last year, Microsoft brought its venture fund M12 to India, the fifth overseas office for the company after San Francisco, Seattle, London, and Tel Aviv. M12, which primarily invests in B2B companies, has the vision to back Indian startups in their growth and late stage.

Update: We have updated the story to reflect that Oyo may raise more funds from Microsoft.