Ritesh Agarwal, the founder and group CEO of hospitality company OYO Rooms, might have an axe to grind with Adam Neumann, the founder and erstwhile CEO of co-working company WeWork.
For two reasons.
First, until recently, Neumann was the great white hope for the nearly $100-billion SoftBank Vision Fund, the world’s largest VC firm. Masayoshi Son (or Masa), SoftBank’s mercurial founder, saw him as his chosen protege who would one day deliver a multi-bagger exit to the billions of dollars that he had invested in WeWork. But this dream was short-lived – the spectacular implosion of the proposed WeWork IPO left the company without its founder and Masa without his blue-eyed boy. Neumann’s departure from SoftBank’s firmament mandated a new Padawan (or apprentice) for Masa—Ritesh Agarwal. But with great attention comes great expectations. Agarwal now bears the burden of fulfilling Masa’s SoftBank-sized expectations.
Second, post the WeWork imbroglio, media attention globally is now focused on other SoftBank bets with folks asking tough questions about other portfolio companies who could be overvalued like WeWork and might face the same fate sooner or later. By default more than anything else, OYO has emerged as the number one number on that list with global publications asking tough questions about its business model and future. Agarwal now has to contend with increased media scrutiny and answer these tough questions.
It is perhaps in anticipation of these expectations and questions that OYO is yet to formally file its financial statements for the last fiscal ending March 2019.
But a few days back, OYO submitted a valuation report to RoC (Registrar of Companies) as part of its long-in-the-making $1.5-billion funding round.
The report makes for interesting reading.
Before we get into the weeds, it might be pertinent to note that these numbers are not audited financials and have been prepared by the company’s valuer rather than its auditor. The company provided a statement to emphasise this – “We would like to clarify that these are not the final audited financials and the same will be issued later by the company along with the annual report that we issue every year and file with the RoC as well.”
Be that as it may, the valuer has stated that the numbers that form the basis of this report have been provided by the company management and is certified by them. So while the final audited numbers might be slightly different from the numbers presented in the valuation report, they are likely to be in the same ballpark and, at worst, directionally correct.
So what do these numbers tell us?
The Profit Problem
In a recent interview, Agarwal claimed that “Three years in a row, we have cut our losses in half every year” and that “it is only a matter of time before we get to profitability”.