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>SoftBank Group, directly and through its Vision Fund, is heavily invested in both. This is the worst case scenario. Every company that Softbank tries to unloa
by Traster 7y ago
>SoftBank Group, directly and through its Vision Fund, is heavily invested in both.
This is the worst case scenario. Every company that Softbank tries to unload becomes a liability because of the association.
On the topic of the actual business, I think there's a really basic question people need to ask themselves when they look at these business models: In 10 years time does the industry you're in look different?
Because that seems to be the fundamental problem here, Oyo's business model is basically that in 10 years time nothing about Hotels will have changed. Well what does that mean? It means we know how much the end company will be worth because it'll just be some multiple of a basket of other similar companies that exist today. So here's the question: Why are they claiming to be more valuable than InterContinental Hotels Group whilst having 1/75th of the revenue?
Now onto the financial engineering - overvaluing your company, borrowing using shares as collateral and then investing that money back into the company. That is a feedback loop, if you can't pay back the loan the shares are worthless and so these loans are entirely unsecured. If that's happening at scale, that is exactly the sort of behaviour that will cause a bubble and it will burst. Someone really should do some proper reporting on that - find out how common it is and particularly if it extends outside of Softbank.
- geodel 7y agoSoftbank also invested in Flipkart $2.5B which till date is huge loss making entity. But they dumped that crap on to Walmart and made a chunk of profit. Else it would be another dent on this poor vision fund.
- mathnmusic 7y agoActually Walmart struck gold because along with Flipkart, they got PhonePe which is currently valued around 10B $: https://dailyfintech.com/2019/11/08/walmart-hits-gold-with-india-payments-as-phonepe-valued-at-10-billion/ https://dailyfintech.com/2019/11/08/walmart-hits-gold-with-i...
- geodel 7y agoAh, thanks for the link. I was totally unaware of this development.
- blntechie 7y agoPhonePe has not made any money so far as well and its valuation itself is questionable. But word is Walmart is looking into hiving off PhonePe from Flipkart and reduce its stake in PhonePe when sun is shining.
- hos234 7y agoOYO is India based unlike WeWork and given what Reliance Jio pulled off and the cash they raised to do it, I feel the context is different. Travel along an Indian highway and try to find your standard roadside motel as you would in US ala Best Western. There are no low-mid tier chains. What OYO is promising is scale. What Best Western took 50 years to do these guys want to do in 5 or 2 idk. It's a worthwhile bet given the Indian consumers purchasing power/quality expectations are on the rise. It's not at all a big stretch to imagine such chains existing in India 10 years from now. Someone is going to build it. You can always ask the established chains in the west and they will tell you how long they think it will take. Now if you asked a AT&T, Comcast or Vodafone whether they could role out a 4G network with 300 million users in 3 years across India, I don't think any of them would think it possible. But Reliance Jio did it anyway. The textbook on how fast you can scale things is being rewritten. In that context what OYO does pull off is going to be interesting to watch.
- achow 7y agoI agree to your analysis of India the underserved market as far as travel & tourism for middle class is concerned. This would have been all good if the focus was only for that market, but the $10Billion valuation I'm sure is not because of India focus.. it is for claiming to be 2nd or 3rd largest owner of hotel rooms in the world - the problem is there. Without solving fully by hyper focusing on one problem/segment/market, it decided to conquer the world because of $$ at disposal.
- madamelic 7y ago>it decided to conquer the world because of $$ at disposal. Injecting $ in to a donkey in the hopes it will become a unicorn. Not all growth is good, some growth is cancer... and it sounds like OYO is basically stage 3.
- puranjay 7y agoI agree with your fundamentals. But I don't believe Oyo's execution is right. Nor do I agree with this statement: > It's a worthwhile bet given the Indian consumers purchasing power/quality expectations are on the rise. India's income and consumption growth have been slower than expected. A recent report even found that rural consumption in India fell compared to 2011-12, and urban consumption increased by a paltry 4%. In the last two decades, everyone has been building businesses in India with the assumption that India will continue growing at "China pace". Real estate prices are the best example. But as everyone is also beginning to find out, the money simply isn't there. At least not for now. Oyo might be a decade too early. This business needs to be built, but not now
- dotchart 7y agoThis is really just clickbait. Why mention the only the Indian revenue when a large majority of revenue comes from outside India? Also note that valuation is from October 2019 round while revenue is from 2018. OYO's YoY growth is 4-5X so revenue is likely much higher now (even if looking only at India).