Ritesh Agarwal says OYO to turn profitable in Q2FY24

OYO in spotlight: Oravel Stays Ltd, which owns and operates OYO said that it will report its first profitable quarter with a project profit after tax (PAT) of over Rs 16 crore. An internal letter written by Ritesh Agarwal, accessed by Republic says, “As per the current trajectory in this quarter, Q2FY24 will mark our maiden profitable quarter with a projected profit after tax (PAT) of over approximately Rs 16 crore.”

Agarwal, during an employee townhall earlier this year, had also shared that OYO expects to clock Adjusted EBITDA of nearly Rs 800 crore in FY24. 

OYO, in its Annual Accounts for FY23, said that it achieved operational profitability in FY23, clocking an Adjusted EBITDA of approximately Rs 277 crore. The company attributed the growth to its focus on core markets, centralisation of key functions, cost optimisation initiatives, divestment, and rationalisation of non-core businesses.

The company’s revenue from operations stood at approximately Rs 5,463 crore in FY23, up from Rs 4,781 crore in FY22, an approximately 14 per cent increase. It also narrowed its losses to Rs 1,286 crore while its Adjusted Gross Profit Margin rose to 43 per cent of revenue and its Adjusted Gross Profit increased by 23 per cent to Rs 2,347 crore in FY23 from Rs 1,915 in FY22.

Agarwal further said, “We have started thinking of shifting our mindset from offering a value first offering to an experience first offering for your customers. We have taken some initial steps in this area with initiatives such as ‘Spotless Stays’ and Super Oyo’. The programme’s pilot across over 250 hotels has seen customer satisfaction score improve by 35 per cent. Today there are over 1,000 hotels tagged as Super OYO’s spread across 140 cities in India. We have also increased focus on the expansion of our premium portfolio with the launch of a premium resort brand, Palette, in India. Today, average customer service ratings of OYO hotels in India have gone up to 4 out of 5 in 2023 from 3.5 in 2022.” 

Global ratings agency Moody’s said that it expects OYO to remain EBITDA positive for FY24. In its report, Moody’s said that OYO will generate around $50-$55 million EBITDA, after shared based payment expenses in fiscal 2024, supported by a strong demand recovery in the hospitality business, increase in the number of storefronts on OYO's platform, and cost optimisations.

Ratings agency Fitch also upgraded its rating on OYO, and said that it expects OYO to deliver positive EBITDA and Cash Flow from Operating Activities in FY24, led by a greater reduction in operating costs than expected, ongoing demand recovery in the travel and tourism industry and stable gross margins.