Job cuts at Oyo, across multiple roles and business functions, are likely to intensify, said senior company executives, as the SoftBank-backed hotel chain struggles to rein in costs and shore up its bottom line.
The magnitude of the firings may be “far larger” than expected, they said on the condition of anonymity. A significant chunk of the 12,000-strong workforce at the Gurgaon-headquartered company is likely to be impacted by the aggressive retrenchment move, they said.
Oyo will lay off 2,400 people in its edition on January 14.
Oyo spokespersons denied that there were further retrenchments in the offing and said that such information is “factually incorrect and misleading.”
The layoffs are happening even as Oyo is reportedly battling allegations ranging from anti-competitive practices to tax evasion, among others.
Valuation Under Scanner
Its position as India’s second most valuable startup – deemed to be worth $ 10 billion — has also come under scanner, especially after founder and group CEO Ritesh Agarwal undertook a $2.5-billion financing round last year in order to buy out early investors Lightspeed Venture Partners and Sequoia Capital, and increase his stake in the company to about 30%.
The turmoil within Oyo follows the high-profile churn at another SoftBank–backed startup WeWork, where a drastic decline in valuation put paid to plans of an IPO and led to the exit of founder Adam Neumann. Since then SoftBank has reportedly resorted to stringent measures to ensure the debacle is not repeated in other portfolio companies. The Japanese company currently holds about 50% in Oyo and has so far invested over $1 billion in the hospitality company.
On Monday, in an internal email to employees, Agarwal confirmed that the company was undertaking layoffs in a bid to be profitable and create greater operational efficiencies though he did not specify the exact number of people who would be fired.
Oyo clocked unaudited net loss of Rs 2,384.69 crore for the financial year 2019, up from Rs 360.43 crore in the previous financial year, according to a valuation report filed by the company in November last year. Operating expenses for the period jumped more than 390% to Rs 6,131.66 crore, while employee benefit expenses also rose almost six-fold to Rs 1,538.85 crore.
Agarwal’s note, which also charted out the company’s strategic goals for 2020, came almost a month after December 19 that the company was in the process of sacking about 2,000 employees across functions in India by January.
Layoffs across roles
The current wave of layoffs include profiles including city heads and employees in other leadership and managerial roles.
People familiar with the matter said the layoffs across divisions are being reflected in a series of exits from Oyo’s internal WhatsApp groups.
The company begun the process of notifying thousands of staffers individually about their status in the organisation through individual emails on Monday. Layoffs in locations like Delhi and Jaipur were communicated to the staff on Monday, while Gurgaon employees were notified on Tuesday. The people cited above said the company fired about 200 employees in Delhi on Monday.
Last week, the income-tax authorities had conducted a ‘recovery survey’ — usually undertaken to investigate a company’s ability to pay the taxes due after its liabilities are determined — at its Golf Course Road office in Gurgaon.
At that time, an Oyo spokesperson had described it as a routine survey to determine the tax deducted at source (TDS) by the company.