Despite losses, OYO will continue its overseas expansion.

Hospitality startup OYO hotels and homes will expand to international markets, The markets include south Asia, Latin America, China, and the UK. They are planning this expansion despite losses increasing seven fold during 2018-2019 senior company executive said on Monday.

OYO board member Aditya Ghosh said in a conference call that the startup will focus on a path to profitability in India as margins improved in FY19. He didn’t share any timeline on when it will become profitable.

Currently OYO has about 18000 hotels and 270000 rooms in India. Soft bank backed OYO consolidated a net loss of about $335 million in 2018-19 from $44 million in FY18.

It said that China and other international markets which were in development and investment mode contributed to about 75% losses during this period.

OYO’s consolidated revenue stood at $951 million in FY19 compared with $211 million in the previous year, while India revenues totaled $604 million. Around 36.5% or $348 million was contributed by the company’s operations outside India, primarily in China. OYO’s net loss as a percentage of its revenue grew to 35% of revenue in FY19 from 25% a year ago. However, in older markets like India, the startup reduced its losses to 14% from 24% of revenue in FY19. In addition, the startup said that gross margin in India increased to 14.7% in FY19 from 10.6% a year ago, although OYO did not detail the margin figures for international operations.

OYO attributed the losses to cost of establishing in new markets, market entry and operational expenses among others. The new audited reports came at a time when they are laying off employees and across India and other geographies to keep costs in check. They also have been criticized for various malpractices including tax evasion, allegations of cheating hotel owners and corporate governance issues.

“Our corporate business grew around 80% in FY19…we currently have around 7,500 clients on the corporate base. In 2019 itself we added 4000 new clients to our corporate base," added Kapoor during the media conference call.

During calendar year 2019 (CY19), OYO claimed to have generated over 90% of its revenue from repeat customers and organic users, with repeat customers alone contributing to 73% of total revenues.

“We have crossed an important milestone of achieving global revenue of $951 million in FY2019, a 4.5 times increase on a year-on-year basis. As we work towards consistently improving our financial performance, ensuring strong yet sustainable growth, high operational and service excellence and a clear path to profitability will be our key to our approach in 2020 and beyond," said Abhishek Gupta, OYO’s global chief financial officer. Ghosh said that OYO’s business expansion plans are currently being executed in three phases depending on how long it has been operational in each geography.

“Entering a new market incurs hiring and setting up costs, and other expenses. These are markets where we have spent barely a year including US, Latin America. Secondly, there are markets where we have already established operations (South Asia and China) where we are looking at improving gross margins. Finally, there is India which is our most mature market where we are driving the best gross margins, and chasing a path to profitability," Ghosh added.