IPO-bound hospitality major Oyo
is on track to report its first-ever profit in the second quarter of financial year 2023-24, with a profit after tax (PAT) of Rs 16 crore, the company's chief executive officer Ritesh Agarwal revealed in an email to Oyo's top management on Tuesday.
"As per the current trajectory in this quarter, Q2 FY24 will mark our maiden profitable quarter with a projected profit after tax of over Rs 16 crore," Agarwal wrote.
The mail, which was seen by Business Standard, said that Oyo achieved operational profitability in FY23, clocking an Adjusted Ebitda of approximately Rs 277 crore, which management at the firm attributed to its focus on core markets, centralisation of key functions, cost-optimisation initiatives, divestment, and rationalisation of non-core businesses.
The company's revenue from operations in FY23, Agarwal added, stood at approximately Rs 5,463 crore in FY23 up from Rs 4,781 crore in FY22, marking a 14 per cent increase. It also narrowed its losses to Rs 1,286 crore.
Oyo's Adjusted Gross Profit Margin, meanwhile, rose to 43 per cent of revenue and its Adjusted Gross Profit increased by 23 per cent to Rs 2,347 crore in FY23 from Rs 1,915 the previous year. The firm also reduced the number of hotels in FY23 to 12,938 from 18,037 in FY22, citing an increased focus on quality customer service across Oyo hotels, globally.
"The overall Gross Booking Value (GBV) increased by 25 per cent, reaching the Rs 10,000 crore milestone, of which GBV from the hotels business stood at Rs 6,172 crore, marking a year-on-year growth of 35 per cent. GBV per storefront on hotels clocked a record growth of 82 per cent to approximately Rs 399,000 in FY23 from approximately Rs 219,000," Agarwal wrote.
The chief executive officer, during an employee townhall earlier this year, had also said that Oyo expects to clock an adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of nearly Rs 800 crore in FY24.
Troy Alstead, an independent director on the board of Oyo and former Starbucks chief operating officer, in a recent interview with Business Standard, said that the company has been focusing on profitability since the start of FY23.
"Profitability is the starting point of ensuring we have a basis to grow from… We believe there is a global opportunity. However, none of that will change what is a tremendous opportunity in India, for instance. There is much more growth to be had here and we will deliver that in a profitable way," he said.
In the email, Agarwal claimed that the company has "started thinking of shifting our mindset from offering a value-first offering to an experience-first offering for your customers. We have taken some initial steps in this area with initiatives such as 'Spotless Stays' and Super Oyo'. The programme's pilot across 250+ hotels has seen customer satisfaction score improve by 35 per cent."
Agarwal also said that the firm sees immense potential in future growth markets like the US and the UK.
During a townhall in July, the firm's chief executive officer Ritesh Agarwal told employees the company clocked adjusted earnings before interest, taxes, depreciation, and amortisation of approximately Rs 175 crore in the first quarter (Q1) of financial year 2023-24 (FY24). This was a 25-fold increase compared to the same period last year, Business Standard had reported earlier.
The company turned cash flow positive in the fourth quarter of FY23. During an earlier townhall in March this year, Agarwal said that the company ended the quarter with surplus cash flow of nearly Rs 90 crore. However, the chief executive officer made no new disclosure of cash flows in Monday's townhall.