After 75% Fall In Valuation, Oyo Rooms Reports Its Profit Of Rs. 229 Crore
Oyo Rooms, a well-known name in the budget hotel industry, has achieved a major milestone. The company has reported its first-ever profit after tax (PAT) of Rs. 229 crore for the financial year 2023-24 (FY24). This accomplishment is particularly significant, as it comes after a steep 75% drop in Oyo’s valuation. Despite the challenges, Oyo Rooms has proven its resilience and remains a key player in the hospitality sector.
A Major Turnaround for Oyo Rooms
Since its founding in 2013, Oyo Rooms has experienced rapid growth and expansion. The company quickly became famous for standardizing budget hotels across India and then expanding internationally. However, this rapid expansion brought its own set of challenges, including financial losses and operational issues. The reported profit of Rs. 229 crore in FY24 marks a significant turnaround for Oyo. This profit follows eight consecutive quarters of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
In FY24, Oyo’s adjusted EBITDA grew by 215%, reaching Rs. 877 crore, up from Rs. 277 crore the previous year. This growth reflects the company’s efforts to improve operations and focus on profitability.
Role of Cost-Management
Oyo’s success in FY24 can be largely attributed to its focus on cutting costs. The company reduced its total costs by 13%, including a major 52% reduction in salary costs. Additionally, Oyo has cut its general and administrative expenses and optimized its marketing spend. These cost-saving measures helped the company maintain revenue growth and achieve profitability.
Oyo’s consolidated revenue for FY24 was Rs. 5,388 crore. It was slightly down from Rs. 5,463 crore in FY23. There was a decline of 1.37%. Despite this small drop in revenue, the company’s strict cost management was key to achieving profitability.
What played the major role in the profit of 2024?
While Oyo’s Rs. 229 crore profit is impressive, it was partly boosted by exceptional items. The company reported a gain of Rs. 453 crore from these items in FY24. This includes a Rs. 240 crore gain from acquiring Oyo Hotels Cayman and a Rs. 249 crore reversal of financial liability. Without these exceptional gains, Oyo would not have reported a profit for FY24.
Even so, this profit marks an important milestone for Oyo Rooms, showing its potential for financial stability. The use of exceptional items does not take away from the fact that Oyo has achieved its first profit after years of losses.
Which challenges are lying ahead now?
Despite the profitability, Oyo Rooms still faces several challenges. The company’s valuation recently dropped from $10 billion to $2.4 billion. Additionally, Oyo’s profitability in FY24 was largely due to one-time gains. Moving forward, the company must show that it can sustain profitability through its core operations.
Oyo’s achievement comes at a time when other Indian startups are also reporting their first profits. Companies like Zomato, Urban Company, and Delhivery have all recently reported their first profits. This trend suggests that Indian startups are beginning to focus more on sustainable growth.
Can Oyo achieve sustainable profit after 75% fall in valuation?
As Oyo Rooms celebrates its first-ever profit, the focus now shifts to the future. The key question is whether Oyo can sustain this profitability. Oyo’s ability to maintain profits will depend on several factors, including effective cost management and operational efficiency.
The profitability is a positive sign, but sustaining it will require ongoing effort. Oyo will need to navigate challenges from both traditional hotel chains and other online travel platforms. However, sustaining this success will be a challenge that the company must meet head-on.
Conclusion
Oyo Rooms has reached a major milestone by reporting its first-ever profit after tax of Rs. 229 crore. Oyo’s success in FY24 was driven by strict cost management and exceptional items that boosted its profits.
While the company has much to celebrate, it also faces significant challenges in sustaining this profitability. As Oyo Rooms continues its journey, its ability to maintain profitability will be closely watched by the industry and investors.
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References:
- Business standard
- OYO Financial Report 2024
- ET Travel World
