MUMBAI, India – Oyo, once one of the fastest growing new technology companies in India, is now declining rapidly.
In recent weeks, Oyo, a low-budget hospitality company, withdrew from dozens of cities, cut thousands of hotel rooms, began firing employees and cut other costs when faced with pressure from its largest investor, the Japanese conglomerate SoftBank , to curb vast operating losses
The withdrawal has been quick and radical. In India alone, Oyo has lost more than 65,000 rooms, or about a quarter of what it had offered to travelers, since October, according to internal data from current and former employees that were reviewed by The New York Times. This month, Oyo also stopped selling rooms in more than 200 small Indian cities, according to company documents and a current employee and a former employee.
The movements add up to the more than 2,000 layoffs worldwide, which Oyo began implementing last week, according to six current and former employees. Before the cuts, Oyo had about 20,000 employees in 80 countries.
Oyo said some of the data obtained by The Times was inaccurate but declined to be specific. In a On Monday by email to employees, Ritesh Agarwal, the company’s executive director, said Oyo was focused on sustainable growth and profitability, which meant layoffs.
“Unfortunately, some roles in Oyo will become redundant as we drive technology-enabled synergy, improved efficiency and eliminate duplication of efforts in companies or geographies,” he wrote in the email.
The Economic Times, an Indian publication, reported for the first time in December that job cuts were coming in Oyo.
Oyo’s shares are part of a broader setback of new companies financed by SoftBank. Armed with a $ 100 billion fund known as Vision Fund, SoftBank has invested money in new businesses worldwide in recent years. That has fueled many young companies to expand, often without thinking of making a profit.
Last year, some new companies financed by SoftBank began to have problems, especially WeWork, the office company, which was not made public when investors began to question their losses. WeWork finally overthrew its executive director and reduced its valuation to less than $ 8 billion from $ 47 billion.
The fall of WeWork raised questions about other new companies that SoftBank had financed and whether those young companies could make money. Last month, the Wag dog walking service underwent several rounds of layoffs before SoftBank He sold his shares with losses. The start of construction Katerra, another company funded by SoftBank, also reduced its staff.
This month, layoffs have gained momentum in the new companies in which SoftBank had invested. South American delivery service Rappi and the new San Francisco Getaround carpool company said they were laying off employees. Zume, a company that used robots to make pizzas and had been valued at $ 2 billion, reduced more than half of its workforce. He also stopped making pizzas.
Some investors and new companies said they were now approaching the SoftBank Vision Fund cautiously, or, in some cases, avoiding it altogether.
“We have advised almost all of our companies to stay away,” said Josh Wolfe, an investor in the venture capital firm Lux Capital that has been critical of SoftBank’s strategy. “Everyone else was afraid to say that the emperor had no clothes.”
SoftBank declined to comment on Oyo and other new companies in which he has invested.
Mr. Agarwal founded Oyo in 2013 to organize small independent hotels in India in a chain. The company markets rooms online and takes a cut of each stay. Agarwal, who has become a business star in India, said he aspired to make Oyo the world’s largest hotel chain by 2023, displacing Marriott.
But when Oyo tried to expand globally, partly driven by SoftBank, he spent a lot on incentives to attract hotel owners and customers to his site. That resulted in losses in India, where Oyo has said he will lose money until at least 2021.
Masayoshi Son, executive director of SoftBank, began investing in Oyo in 2015. SoftBank and its Vision Fund now own half of their shares. While Mr. Son called Oyo a jewel in his background and urged him to grow rapidly, he has since changed his position.
As Oyo’s losses increased, the company’s main leaders told employees that SoftBank had demanded that it become profitable on a basis known as EBITDA, earnings before interest, taxes, depreciation and amortization, in mid-2020 , according to current and previous employees. .
In another sign of SoftBank’s changing position, Yahoo Japan, which is owned by SoftBank, In November, it disconnected a Japanese apartment rental company with Oyo. Most of Oyo’s employees involved in the company in Japan have been laid off or relocated, current and former employees said.
Oyo faces other problems in India. On Friday, Indian income tax authorities visited the company’s headquarters outside New Delhi, requesting reams of documents. The tax department and Oyo said the government was examining whether the company was withholding and properly remitting income taxes from payments to suppliers.
The Times reported this month that Oyo had offered thousands of unlicensed hotel rooms and sometimes offered free rooms to government officials to deter his application. The Times also described how some Oyo employees worked together to commit fraud against the company.
In his email on Monday, Mr. Agarwal said the behavior described by The Times would violate the company’s code of conduct.
“We take all accusations very seriously and are investigating each and every one,” he wrote.
To stop losses, Oyo has also reduced personnel and supplies, such as mineral water and cleaning fluids in the hotels it manages, according to current and former employees. Oyo staff members who manage some of the hotels have been instructed to save more money on electricity bills by turning off lights, elevators and even boilers for hot water, they said.
Morale has plummeted among thousands of Oyo workers worldwide, current and former employees have said.
Prabhjeet Singh, an Oyo business development manager who left the company in September, said employees who criticized the company were at greater risk of losing their jobs.
“It’s a culture of silence,” he said.
Oyo’s reputation has deteriorated so much in India that other employers are reluctant to hire their former workers, said Singh, who has not been able to get another job.
“They look at me as if I had committed a crime working in Oyo,” he said.
Vindu Goel reported from Mumbai, Karan Deep Singh from New Delhi and Erin Griffith from San Francisco.