Main risks to watch out for
The Oyo hotel company on Friday filed preliminary documents with the market regulator Securities and Exchange Board of India (SEBI) to raise Rs 8,430 crore through an initial public offering (IPO).
Here is an overview of some of the main risk factors listed by OYO in its DRHP
COVID-19[female[feminine: Oyo, which was launched in 2013 by Ritesh Agarwal, says the ongoing pandemic and measures taken by governments to curb its spread have had a negative impact on its business. He said these measures are likely to affect the travel industry and the business of the company.
Perpetual losses: Oyo may have become a popular platform for booking hotel stays; however, the company has a history of net losses each year since its incorporation. This can delay its ability to achieve profitability and may prove to be a factor causing the company to look at uncertainty.
Growth rate: The inability to grow at historical rates and any difficulty in executing expansion plans and implementing growth strategies is another aspect listed by the company as a risk.
Negative publicity: Another risk it faces, depending on the company, is the possibility of not maintaining or improving the brand and reputation, which is essential for growth, or any negative publicity that could harm the brand.
Technological challenges: If the hospitality business fails to innovate and develop its platform or does not keep up with technological developments, it may not remain competitive enough and the impact of this will be reflected on the business.
Zostel case: Oyo is engaged in a legal battle with his rival Zostel. The issues between the two companies date back to 2015 after the failed merger talks between Zo Rooms and Oyo. In March this year, a Supreme Court-appointed arbitrator said that Oyo had violated its agreement to acquire Zo Rooms, adding that the latter could proceed with the execution of the final agreement.
Third party distributors: The Unicorn indicated its reliance on third-party distributors, including OTAs, travel management companies and global distribution systems to market and distribute storefronts, as another key factor that can negatively affect its margins. and its profitability.
Security: Oyo said he has no control or ability to predict the actions of his customers, clients and other third parties, such as neighbors or guests, during a customer’s stay.
“If our clients, clients or third parties engage in criminal activity, misconduct, fraud, forgery, negligent or inappropriate conduct, immoral trafficking, sexual violence or using our platform as a vector of criminal activity, our platform and the listings on our platform may be considered unsafe and we may receive negative media coverage or be the subject of government investigation, which could have a negative impact on our brand and reputation and reduce the adoption rate of our platform, ”he said.
Economic downturn: A decline in the travel and accommodation industries or any economic downturn can affect its financial performance.
Price : In documents filed for registration, Oyo said that its pricing methodologies and the revenue shares it charges to customers can be affected by a number of factors and that it may not always be successful in attracting and retaining customers. clients and clients.
Competitive environment: “The business and industry in which we participate is highly competitive, locally and globally, and we may be unable to compete successfully,” said the unicorn.
(Edited by : Yashi Gupta)