9 billion U.S. dollars invested in Indian hotel OYO, what is the "business experience" of Microsoft in the first half of the year?

 OYO, an 8-year-old Indian unicorn, recently got the attention of Microsoft.

According to Sina Technology, people familiar with the matter revealed that Microsoft is in late-stage negotiations with the Indian hotel chain OYO, and Microsoft plans to invest in OYO at a valuation of US$9 billion.

People familiar with the matter said that the transaction may be announced in the next few weeks, kicking off the OYO listing. And Microsoft's investment may involve OYO's shift to Microsoft's cloud services.

Previously, OYO's investors included SoftBank Vision Fund (OTCPK: SFTBY), Sequoia Capital (Sequoia Capital), Lightspeed Ventures (Lightspeed Ventures), Airbnb (NASDAQ: ABNB), and Hero Enterprise. SoftBank holds 46% of the company. Of shares.

Favored by Microsoft, where does OYO come from?

Oyo Hotel is an Indian economy hotel chain brand established in 2013. Launched the first OYO hotel APP in 2015 and entered the Chinese market in November 2017.

OYO aims at budget hotels, providing lower standard decoration design and service requirements, and charging lower initial fee and service fee commissions. On the one hand, OYO provides consumers with low-cost hotel reservation services; on the other hand, it can also increase occupancy and revenue for a large number of non-branded hotel chains.

This integration model allows OYO to quickly occupy the market. In 2019, OYO announced that it covers more than 300 cities in China, with more than 19,000 stores, a total of approximately 780,000 rooms, and more than 10,000 employees. It has become the largest single-brand hotel in China, the second-largest in China, and the sixth-largest in the world. Hotel management group.

Check OYO's financing, from its inception to the present, its financing events have reached 14 with a total amount of more than 2.1 billion US dollars. The most recent financing was on July 16, 2021. OYO completed a TLB financing of US$660 million, obtained an oversubscription of 1.7 times by global investment institutions, and committed an investment of nearly US$1 billion. This financing, OYO will be used to repay historical debts, optimize the balance sheet, and increase the development of business such as technology product research and development.

From the perspective of financing, OYO's fundamentals are favored by investment institutions. But from last year's point of view, the cause of the epidemic has caused a major blow to the tourism and hotel industries, and OYO will inevitably be involved in this "storm".

According to Moteng Ventures, in April 2020, OYO's room occupancy rate dropped to 20-25%, with a gross profit margin of only 60%, and it lost tens of millions of dollars in China.

Internally, in February 2020, Shi Zhenkang, the chief operating officer of one of the eight CXOs in OYO China, resigned. Soon after, an internal letter about business adjustments appeared, and substantial layoffs began. According to Tech Planet, OYO's overall layoff ratio in China has reached about 80%. Its business scope in China is also shrinking. According to OYO China’s internal letter, from March 1st, OYO China will reduce the original 11 regions to 7 and 48 Hubs (regional centers) to 30. Consolidation management.

The impact of OYO during the epidemic is not small. Entering 2021, the epidemic situation has gradually improved. OYO's hotel occupancy rate has returned to the pre-epidemic occupancy rate of 40-45%. Despite this, OYO remains cautious during this difficult period and will cut back on commercial businesses that cannot survive independently or continue to lose money.

In June of this year, OYO began to focus on the mid-to-high-end market and launched Collection O, a mid-range business hotel brand in India, Indonesia and other regions. It plans to focus its business development on the Indian, Southeast Asian and European markets, instead of focusing on the former core markets of China and the United States.

From high-profile admission to shifting the center of gravity, OYO has ups and downs. In the face of the next "chess game", OYO still needs the blessing of capital to move into the distance.

Extend the field of "food, clothing, housing, and transportation" to help Microsoft's smart cloud business development

What is the purpose of Microsoft's investment of 9 billion US dollars in OYO?

Microsoft is a computer giant with a strong brand. Its main products include the computer operating system Windows and office software Office, and it has an unshakable market position.

Looking at Microsoft's investment and acquisitions this year, it may be possible to tell its goals: first, to enter new areas to achieve ecological development; second, to enhance its own technology and product strength; third, to expand its own technology and product application channels.

Regarding entering new areas to achieve ecological development, Microsoft invested in the self-driving startup Cruise this year to enter future technology; on the other hand, Microsoft acquired Suplari, an artificial intelligence analysis expenditure, and Nuance, an artificial intelligence and voice technology company, to enter the intelligent voice field.

Regarding the enhancement of technical product strength, Microsoft this year invested in Rescale cloud computing simulation platform company, Databricks big data unicorn and Agolo tool software company, and acquired security software manufacturer RisklQ.

Laying out the future and upgrading technology, the next step is to implement technology development on the ground.

On April 3, 2021, Microsoft participates in the US food technology start-up Eat Just. It is understood that Eat Just is famous for its mung bean egg substitute "JUST Egg". In September 2020, JUST Egg's offline sales have expanded to more than 17,000 retail stores in the United States, accounting for 41% of its retail sales.

This time Microsoft intends to invest in the Indian hotel chain OYO. According to people familiar with the matter, this investment may involve OYO's use of Microsoft's cloud services.

OYO's Internet model has value. Through the blessing of capital, the completion of "burning money for users-scaling up the right to speak-perfecting products", this model has made it successful in the Indian market.

From the perspective of investment, it is not difficult to see Microsoft's purpose to extend technology products to areas of life such as "food, clothing, housing, transportation" and other areas of life to open up room for development and increase economic growth.

From the perspective of Microsoft’s latest performance, in the 2021 Q4 fiscal quarter, Microsoft’s smart cloud division’s revenue was US$17.4 billion, a year-on-year increase of 30%; the productivity and business process division’s revenue was US$14.7 billion, a year-on-year increase of 25%; the personal computing division’s revenue Revenue of 14.1 billion U.S. dollars, an increase of 9% year-on-year.

Carlyle (Canalys) released a report showing that the global cloud computing market grew by 35% year-on-year to 42 billion US dollars in the first quarter of this year. Among them, Microsoft Azure's market share was 19%, second only to Amazon (AWS) 32%, and Google ranked No. 3. The market share is 7%.

It can be seen that the smart cloud business occupies a large proportion of Microsoft's total revenue, and its investment and acquisitions can also show the ecological development of Microsoft. Extending the "tentacles" to OYO and deploying the development of hotel cloud services is a move of Microsoft. The future decisions and effects are worth waiting for!