Software giant Microsoft could be looking to invest in a major Indian startup, but the company might not have a whole lot to do with software.
Microsoft is reportedly in talks to invest in Oyo Rooms. The investment could happen at a valuation of $9 million, marginally shy of its $10 billion valuation from 2019. The talks are reportedly at an advanced stage, and the deal could be announced today. The size of the investment is yet unclear.
Just last fortnight, Oyo Rooms had raised $660 million in debt funding from global institutional investors. That issue had been oversubscribed by 1.7 times.
Oyo has had a rough couple of years, with its business being battered by the coronavirus pandemic. But Oyo hadn’t been doing particularly well even before the pandemic had hit. A bombshell New York Times report, published in January 2020 right before the extent of the pandemic had become known, had alleged that Oyo had created fake room bookings to impress investors. The very same month, Oyo had fired 2,000 employees in China, which had led to protests outside its offices. In India, income tax officials had conducted a “recovery survey” at its Gurgaon office to determine if it was correctly paying taxes, and some partner hotels had alleged they were having trouble contacting its representatives.
In recent times, Oyo has seemed more upbeat about its prospects in recent times, and hinted that its business was back to normal. It’s unclear though what synergies Microsoft could hope to unlock with its Oyo investment — it’s possible that Oyo could use Microsoft’s Cloud services to run its tech operations. Also, a $9 million valuation doesn’t seem to be a particularly tempting discount for Microsoft — just a few quarters ago, Oyo’s biggest investor Softbank had slashed its valuation to $3 billion.
But there’s unprecedented optimism about India’s startup space at the moment — Zomato’s IPO and subsequent pop in share price appears to have created a new benchmark for valuation of many Indian startups. All manner of Indian companies seem to be rushing to the bourses to take advantage of this momentum, and it’s possible that Microsoft wants to get a slice of Oyo Rooms before it lists in India.
Microsoft has previously invested in Indian startups — it had been a major investor in Flipkart, and is also an investor in Daily Hunt and SaaS firm FarEye. But it seems to want to double down on investing in Indian startups — last June, Microsoft had opened its venture fund office M12 in Bangalore, its fifth such office in the world. Microsoft was reportedly keen on pursuing investment opportunities in India’s B2B software start-up space, with a focus on artificial intelligence (AI), business applications, infrastructure, security, and vanguard technologies.
Oyo Rooms is a hotel company and isn’t directly check any of those boxes, but these are good times to be an Indian startup. A record number of unicorns have been created, record levels of funding have been raised, and startup employees are getting superbikes as a part of their joining kits. These are unique times, and a Microsoft investment in Oyo Rooms could just be par for the course for how things are in 2021.