Oyo Rooms looks for more funding through venture debt

Vacation rental and hospitality startup, Oyo Rooms, is looking towards venture debt to help raise new funding that it will use for its Oyo Townhouse property vertical it recently started in India this year.

The company, which recently raised $1 billion in equity, is in talks with several venture debt firms and some of the top private banks to raise several hundred crores in debt financing, said three people familiar with the matter. The idea is to use the funds to buy properties for Oyo Townhouse, as the company looks to deploy its recently-raised equity for overseas expansion, they said.

Oyo, founded in 2013 by Ritesh Agarwal, is bullish on Townhouse, which was launched in January 2017. Townhouse properties, owned and fully managed by Oyo, have played a key role in improving the startup’s image with customers.

“When they started with the marketplace, they didn’t need any leverage at that point," said a venture debt investor, requesting anonymity. “But once they got into Townhouse, there was a need for investing into the properties, which made them turn to debt financing."

Oyo is not the only one to diversify its balance sheet with debt. This is a trend and several top startups in the Indian ecosystem, including Swiggy, BigBasket, and Byju’s, have turned to debt even while racking up millions in equity funding.

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