The year 2020 might prove to be the year when Indian startups will have to wake up from their slumber and smell the coffee. And the ongoing economic slowdown may only further increase the vulnerability of Indian startups that are already under enormous pressure to streamline their balance sheet. The first cracks of this vulnerability have become all too palpable in Oyo Rooms – a proud unicorn and one of the largest hospitality companies of India.
Oyo Rooms is soon likely to fire nearly 20% of its total workforce in India as part of its restructuring exercise, according to media reports. 20% accounts for nearly 2,400 employees out of approximately 12000 – 13000 employees that work for Oyo across the country. The restructuring exercise has already been started, after Oyo’s founder and CEO Ritesh Agarwal dashed out an mail on Monday; informing the employees about the upcoming job cuts in the company.
The restructuring exercise will be primarily focused on mid-level management, business development, sales and marketing.
According to anonymous sources, as quoted by The Economic Times, another restructuring exercise is likely to be kick-started in March. If this is indeed true then Oyo’s restructuring exercise will result in one of the biggest laydowns in the Indian startup history.
However, Gurgaon based company’s massive laydown exercise is not just restricted to India alone. Media reports claim that the SoftBank funded company has also handed pink slips to nearly 5% of its strong 12000 staff in China, which is startup’s second home after India.
Is SoftBank Piling up Pressure on Oyo?
In every likelihood, the upcoming massive laydown in Oyo is everything to do with the pressure that is being exerted by SoftBank. The Japanese telecom conglomerate is one of the biggest investors in the Gurgaon based company and desperately wants all its high-profile portfolio companies to streamline its balance sheet especially in the wake of WeWork’s collapse.
It is evident that Masayoshi Son’s company cannot afford another embarrassing slip up, after the massive setback following the WeWork’s IPO fiasco. Apart from Oyo, SoftBank is also reportedly exerting pressure on Paytm to control its growing losses. Buzz is that SoftBank is likely to push both companies to go for an IPO possibly next year. And in the aftermath of WeWork’s IPO fiasco and Uber’s IPO failure, Masayoshi Son’s company may go all out to ensure Oyo and Paytm’s IPO doesn’t turn out to be another dud.