In a remarkable financial turnaround, OYO has reported its first-ever net profit for the fiscal year ending March 2024. The hospitality giant, backed by SoftBank, posted a profit of Rs 230 crore, a significant improvement from the Rs 1,286 crore loss in FY23. Despite a slight decline in revenue, OYO’s cost-control measures and exceptional income have contributed to this positive outcome. This article delves into OYO’s financial performance, the strategies that led to profitability, and the implications for its future.
Financial Performance Overview
OYO’s revenue from operations saw a marginal decline of 1.4%, dropping to Rs 5,389 crore in FY24 from Rs 5,464 crore in FY23. The company’s income from accommodation services, which forms the bulk of its revenue, decreased by 7.3% to Rs 3,441 crore. However, income from commissions and bookings brought in Rs 1,344 crore, while other revenue streams such as tour packages, events, and insurance services contributed to the overall revenue.
Despite the flat revenue, OYO’s cost-control approach played a crucial role in achieving profitability. The company’s total expenditure decreased by 13% to Rs 5,726 crore in FY24, down from Rs 6,800 crore in FY23. This reduction in costs, coupled with Rs 453 crore in exceptional income, primarily from the acquisition of OYO Hotels Cayman and the reversal of financial liabilities, led to a net profit of Rs 230 crore.
Cost-Control Measures and Exceptional Income
OYO’s cost-control measures have been instrumental in its financial turnaround. The company’s lease rental and service component costs, which account for 50% of its overall expenses, declined by 8% to Rs 2,885 crore. Additionally, OYO’s expenditure on salaries and employee benefits saw a significant reduction of 52%, primarily due to a decrease in ESOP costs.
The company’s focus on optimizing its cost structure extended to other areas as well. Advertising, commissions, brokerage, legal, IT, and other overheads were streamlined, contributing to the overall reduction in expenses. Furthermore, OYO’s exceptional income of Rs 453 crore, which includes a fair value gain on the acquisition of OYO Hotels Cayman and the reversal of financial liabilities, played a pivotal role in achieving profitability.
Implications for OYO’s Future
OYO’s financial turnaround in FY24 marks a significant milestone for the company as it prepares for its IPO. The positive financial performance is expected to boost investor confidence and pave the way for future growth. The company’s improved EBITDA margin of 15.5% and a return on capital employed (ROCE) of 13.4% reflect its strong operational efficiency and financial health.
Looking ahead, OYO aims to capitalize on its global expansion strategy and continue its focus on cost optimization. The company’s acquisition of K&J Consulting, which operates the premium rental homes company Checkmyguest Group, is a testament to its growth ambitions. As OYO continues to expand its footprint and enhance its service offerings, maintaining profitability and operational efficiency will be key to its long-term success.
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