Oyo Hotels and Homes is firing an estimated 2,400 employees, or 20% of its total workforce in India, over the course of this week, people directly familiar with the matter told ET.
The layoffs, which kickstarted with an internal email by founder Ritesh Agarwal to employees on Monday morning, will primarily be in mid-management, business development, sales and operations roles, and in select technology teams.
“The intent is to bring the headcount down by another 20% at least, and launch another resizing exercise by the end of March,” a top company executive told ET, requesting anonymity
The move comes as the SoftBank-backed hospitality chain looks to rein in costs and streamline operations.
Read: India’s fast-growing startups cut employee costs
In the internal email that ET has reviewed, Ritesh Agarwal, also the chief executive of Oyo, said, “One of the implications of the new strategic objectives for 2020, is that, like the leadership team, we will reorganize more teams across businesses and functions. And this means that, unfortunately, some roles at Oyo will become redundant as we further drive tech-enabled synergy, enhanced efficiency and remove duplication of effort across businesses or geographies. As a result, we are asking some of our impacted colleagues to move to a new career outside of Oyo.” A copy of the full letter sent by Ritesh Agarwal below.
Agarwal did not, however, specify the exact number of employees who would be let go in the company’s home market, where its estimated staff strength is 12,000, down from about 13,000 after it undertook low-level retrenchments of staff over the last few months, as ET reported earlier. Oyo declined to comment.
Oyo is also expected to undertake a retrenchment exercise in other geographies where it operates. Last week, news agency Bloomberg reported that it had dismissed 5% of its 12,000-strong staff in China, its second home market, for non-performance.
“Oyo’s SilverKey business (for corporates) has almost been disbanded,” the company executive, who is not authorised to speak to the media, said.
The company could also streamline operations, moving its various hospitality brands, Oyo Home, Oyo Life and SilverKey within the same business function, the executive added.
Other non-core business lines, such as wedding-focused event management company Weddingz, which have been described as a “non-performing bet” are also expected to undergo significant cuts in investments, sources told ET.
Read: What 2020 holds for Indian Internet majors
Additionally, Oyo has also offloaded about 25% of its unprofitable properties in India across businesses, one of the largest cleanups for the country’s largest real estate aggregator, a second senior company executive told ET, also requesting anonymity.
The company runs about 8,000 hotels, primarily under franchise arrangements, and about 800 hotels under the self-operated business model.
The layoffs have come at a time when the Gurugram-based chain is battling allegations of anti-competitive practices, tax evasion, and bribery among others, according to a report by the New York Times.
“Recently, there have been a few questionable claims in a publication and today I want you to hear about them from me. The said article described behaviour that would violate our Code of Conduct. We take all the allegations very seriously and are looking into each and every one,” Agarwal said in his email.
“We, of course, continue to be subject to regular external audits and have reached a stage as a company where we are making significant investments in compliance, training, and governance that ensure operational consistency and accountability,” he added.
The startup has also come under the scanner, with investors raising questions over its $10 billion valuation tag and urging it to move towards profitability.
Oyo clocked net losses of Rs 2,384.69 crore for financial year 2019, up from Rs 360.43 crore in the previous financial year, according to a valuation report.
Operating expenses for the period jumped more than 390% to Rs 6,131.66 crore, while employee benefit expenses also rose almost six-fold to Rs 1,538.85 crore.
Last week, ET reported that the Income Tax authorities had conducted a ‘recovery survey’ at its Golf Course road office in Gurugram, on the outskirts of Delhi, usually undertaken to determine a company’s tax liability and when accused of not paying the same.
At the time, an Oyo spokesperson had described it as a routine survey to determine Tax Deducted at Source.
Apart from Oyo, a number of SoftBank portfolio firms have begun laying off employees, including pizza making robot company Zume Pizza, car sharing startup Getaround, delivery company Rappi, along with the biggest setback faced by the Japanese investor in office sharing platform WeWork. SoftBank companies have collectively axed more than 10,000 jobs in the last few months.
Below is a copy of the full letter sent by Ritesh Agarwal
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