Oyo Rooms set to acquire rival Zo in all-stock deal

SoftBank-funded budget hotel aggregator Oyo rooms is all set to acquire its Tiger Global-backed smaller rival Zo rooms and a deal may be announced within 10 days, according to a person familiar with the development.

The development comes barely weeks after preliminary reports of Oyo looking to acquire Zo first surfaced in the media.

Queries sent to both Ritesh Agarwal, founder of Gurgaon-based Oyo Rooms' operator Oravel Stays Pvt Ltd, and Dharamveer Chouhan, founder and CEO of Zo Rooms, did not elicit a response by the time of filing this article.

In November, Agarwal told Techcircle.in in an interview that consolidation was bound to happen in the budget hotel aggregation segment. "If anyone innovates and creates a better way of solving guest experiences, we will be interested," he had said at the time.

The deal may involve Oyo rooms acquiring only the assets of Zo and not take on its liabilities, The Economic Times reported on Thursday.

According to this report, the deal will give the seven founders of Zo — Chouhan, Akhil Malik, Paavan Nanda, Tarun Tiwari, Chetan Singh Chauhan, Abhishek Bhutra and Siddharth Janghu — and investors a combined 7 per cent stake in Oyo. Zo's founding team will exit the company after the transition is complete, the report said.

While Zo had been struggling to raise fresh funding, the deal will consolidate Oyo's position as India's largest budget hotel aggregator.

Incidentally, Oyo had last year sued Zo alleging infringement of intellectual property rights, possibly by some former employees who had joined the smaller rival.

A deal between Oyo and Zo would come after WudStay Travels Pvt Ltd, which owns online aggregator for budget hotels WudStay.com, acquired offline rival Awesome Stays in August to enter six cities.

Oyo Rooms had in August raised $100 million (Rs 635 crore) in a funding round led by Japanese tech conglomerate SoftBank. Existing investors Sequoia Capital India, Lightspeed Venture Partners and Greenoaks Capital had also put money in that round.

Zo Rooms had raised a Series A round of funding led by Tiger Global with participation from Orios Venture Partners in July.