Microsoft backs India’s Oyo at $9.6 billion valuation

Microsoft has invested $5 million in Indian budget hotel chain Oyo, according to a regulatory filing this week. The investment

confirms a TechCrunch scoop

from last month.

The new investment values Oyo at $9.6 billion, only slightly below

the $10 billion implied valuation

from the Indian startup’s previous financing round in 2019. The startup, which lost significant business to the pandemic, was valued at just $3 billion in recent quarters

by SoftBank, one of its largest investors.

TechCrunch reported earlier that this strategic investment may also involve Oyo shifting to use Microsoft’s cloud services. The company is planning to file for an IPO later this year, according to two people familiar with the matter.

Oyo, which is one of India’s most valuable startups, has aggressively expanded to many markets including Southeast Asia, Europe and the U.S. in recent years. But

some of its missteps

— “toxic culture,” lapse in governance, and relationship with many hotel owners — have scarred its growth.

Just as the startup was pledging to improve its relationship with hotel owners, the pandemic arrived. In response, Oyo slowed its growth and

laid off thousands of employees globally

earlier this year as nations across the world enforced lockdowns.

The pandemic hit the seven-year-old startup like a “cyclone,” Agarwal told Bloomberg TV last month. “We built something for so many years and it took just 30 days for it drop by over 60%,” he said, adding that the firm had not made any decision on exploring the public markets.

Airbnb-backed Oyo had between $780 million to $800 million in its bank, Agarwal said at a virtual conference recently and had pared its “monthly burn” across all businesses to $4 million to $5 million. (The startup

had about $1 billion in the bank

in December 2020.)

Last month — after Agarwal’s remarks at the aforementioned conference — Oyo said it had raised $660 million in debt. That debt was used to pay off the previous debt, according to a person familiar with the matter.

If the deal between the two firms materializes, it will be Microsoft’s latest investment in an Indian startup. The firm has backed a handful of startups in the South Asian market, including

news aggregator and short-video platform DailyHunt,

e-commerce giant Flipkart

, and logistics SaaS firm FarEye

.