Disruption in Co-Work? OYO acquires Innov8 for Rs 220 Cr

In a major diversifying move from its hospitality business, OYO Hotels & Homes has acquired Innov8—the co-working startup—in an all cash deal for Rs 220 crores.

However, instead of killing the Innov8 brand, OYO will support it in its independent functions and will launch more centres. In fact, the company has already made an expansion plan for the whole year.

Over the next year, OYO is planning to open over 35 new co-working spaces in the major metropolitans. It has also started two new co-working brands – PowerStation and WorkFlo – so as to cater to a variety of start-ups and companies.

Flush with funds, OYO had been scouting for deals in the co-working segment for a while, at the behest of SoftBank. After expanding into the co-working segment, the Ritesh Agarwal-led company has turned into a full stack real estate leasing company.

OYO’ has not only disrupted but also dominated the hotel-renting business. And now OYO’s entry in the shared workspaces segment could be another disruptor in the real-estate market as OYO would aim to provide affordable office and workstation spaces just as in the hotel and long-term accommodation space.

OYO’s expansion

Innov8 is the fourth acquisition for the SoftBank-backed company. Last year, the firm had launched OYO Living (now OYO Life). Earlier, it acquired Weddingz, AblePlus and Novascotia Boutique Homes (now known as SilverKey).

OYO’s expansion is powered by its $800 million scoop from SoftBank in Sept 2018. OYO planned to expand India and outside, especially China, with that investment. Two months later, it raised another $103 million strategic capital from Singapore-based ride-hailing major Grab.

As of now, the OYO Hotels has more than $1.1 billion in its balance sheet.

OYO in workspaces

After acquiring Innov8 — that has presence across four cities — OYO is eyeing the asset management and real estate expertise of the co-working firm in the sphere of managed workspaces.

The company has inducted all the Innov8 employees and it will continue to work as a separate brand. However, understanding the demand in the co-work space segment, OYO is launching two types of properties to tap all kinds of clientele.

OYO’s brand PowerStation will target the clients whose team sizes are growing and want “managed workspaces” in emerging business districts. It is learnt that the first PowerStation centre is soon going live at the Pioneer Square complex on the Golf Course Extension Road in Gurugram. It will accommodate over 1,000-workstations. Pioneer Square is home to big firms such as Pepsi, Sun Life, and many others.

WorkFlo will be a more affordable property and it aims to transform the regional offices, sales offices, customer support centres, and growing start-ups. It will offer multi-city solutions on a budget.

Competition

OYO’s acquisition of Innov8 will bring it in direct competition with the likes of co-working giants such as WeWork, Awfis,GoHive, etc.

OYO’s trajectory

OYO’s made its international debut quite recently with its hospitality business. It is now present in 10 countries, over 500 cities and hosts millions of guests in over 18,000 hotels.

The company is growing roughly at 4.3 times year on year. Its sales in December amounted to $1.8 billion. The Gurugram-based company has also announced to infuse Rs 1,400 crore in the ongoing calendar year.

It’s launching an upscale hotel brand – Collection O. With just 12 hotels in this category at present, OYO aims to feature 650 properties in this range by the end of the year.