Oyo's Ritesh Agarwal and Aditya Ghosh on the latest reshuffle, accelerating losses, IPO, Softbank and growth

According to Ghosh, the company's growth has been an exhilarating experience. "We keep saying it is a once-in-a-lifetime opportunity and it is great to see that many of our dreams are becoming a reality. Somehow we have come across a business model that has secular need around the world. The company is growing faster than we had expected it to grow, it is growing at a much bigger geographical reach that basically means there is more expectation from us,” he said.

Agarwal said there is no reason for the company to take the IPO route now.  “Our balance sheet is upwards of $2 billion, it is very strong, so there is no reason to try and be public immediately. Our focus is on the business. At the same time, we are building the right kind of organisation that is IPO ready,” he pointed out.

“Our changed narrative is a part of growing up for the company and this has been the case for the last few months. Our evolution has been pretty significant,” he added.

Edited excerpts from the interview:

Agarwal: Look at OYO, we have constantly said we think a few quarters or a few years ahead. So back in 2014 or 2015, when Abhinav Sinha came along, a lot of people said that for such a young company why does it need a high profile COO and eventually we all know that turned out to be for the best. When Maninder Gulati came in 2015 that was great for our organisation. Same was the case last year when a lot of people said that your business essentially is India and if Aditya is a CEO of OYO India, then why are you making this decision? Our view was looking one year ahead. Today OYO India is probably 40 percent.

Now, when we think about OYO two years later, we need a fantastic partner on our board who can help think about corporate governance, about the path towards profitability, help drive the organisation in that direction. We started making these decisions a few months back, we brought in Betsy Atkins to begin with, Aditya is a great addition and we will constantly look at bringing in great quality on board to strengthen this group.

Ghosh: It has been just a phenomenal one year. It has been an exhilarating experience and the way the company has grown both in South Asia as well as globally. We keep saying it is a once-in-a-lifetime opportunity and it is great to see that many of those dreams are becoming a reality. Somehow we have come across a business model that has secular need around the world. The company is growing faster than we had expected it to grow, the company is growing at a much bigger geographical reach that basically means there is more expectation from us. So again, as Ritesh said, let us look a few years ahead. What is expected of a truly global company like OYO, what kind of governance would be expected of us, what kind of board would be expected of us, how do we deliver on what we are promising to the consumer, how do we become a profitable business, how do we stay true to some of the core promises and that is where I guess the fact that we were beginning to deliver on what we had promised in South Asia and thanks to fantastic team that I have around me, I think that gave us the confidence to say let us start discussing about what tomorrow and day after and a week after that is going to look like.

I have spent the last 15 years running a large consumer business. I have had the privilege of running a publicly traded company which is a large business, a profitable business. But most importantly deeply immersed in OYO for the last one year that has brought an experience that I hope that I can now take to the board. We have got a great board. We have got very experienced industrial directors, we have got an independent director like Betsy, we have got a founder like Ritesh and I hope I can bring that management experience depth into that board and say - look now let us start again putting together the building blocks which will - I don’t know how to put it - may be a dream of being seen not just as the largest and the fastest, but one of the most well-respected ‘blue-chip’ companies, I think that is the dream.

Agarwal: Generally, it is important to make sure that you can disassociate the sentiment with the fact. For us, SoftBank Vision Fund has been a great partner as has been well articulated. We have always been expected to just deliver the plan. We had a business plan that we said out, a couple of years back, and our shareholders including Vision Fund just expect us to get there. Specifically about IPO and the public offering, as you may know, our balance sheet is upwards of $2 billion.

Agarwal: So those numbers are not an audited financial yet, so please expect our financial to come soon, but even if you assume that that is close to $300 million. The past few years combine is probably a little bit more versus that the balance sheet is very strong, so there is no reason to try and be public immediately. Our focus is on the business, building a good company and at the same time we are building the right kind of organisation like Aditya says to be IPO ready. Then when we make the choice in terms of a company, it is the decision of the board and we have a fantastic board including our new incoming board member.

Ghosh: No. When you step back – I keep saying that the initial public offering is a milestone in a journey. You cannot time a milestone but you have to be ready for that milestone.

So it is not pressure but it is not an unreasonable expectation from a board-run company like OYO where the management team and the board are expected to say, are you building a business that as Ritesh was saying, I kept saying – should it be IPO ready? So that when the circumstances arrive, when the board comes together and says now is the time to push the button on a publically traded business, then the business should not hold it back.

What that means is – is it a profitable business, is it a proven business model, is there a great future to it? An IPO is only a trigger point where you now have a bigger expectation to even more shareholders. Therefore, we will focus on building this credible business.

As and when the board decides, we will hopefully be ready with a business that is well-placed, well-respected and then you can take it.

Agarwal: I think that is a different question altogether but an important question.

To begin with, I think it is very hard to deny that WeWork changed the way how people went to work and we respect them for that. However, every global event like that of WeWork is an important learning experience for all the large scale start-ups and young companies and one of the things that is clearly being seen in the eco-system is that high growth only is not appreciated, growth with high focus on profitability is accepted. That is something that we fully acknowledge and the best way to be able to think about it is sort of saying how does OYO, in its view, looks at that specific feedback that it is being received for, broadly every high-growth company. Here at OYO, we feel we have mature geographies and we have new geographies.

Mature geographies are like the geographies that my colleague like Aditya has been driving or on the other hand new geography was China last year. This year, it is the United States or Europe. So whenever we bring mature geographies, there should be a consistent improvement in underlying economics.

Our audited statements have not been filed yet but very soon, we will have our audited statements and annual reports published and you can expect a perspective about how our mature businesses are continuously showing the path for newer businesses to be able to show significant operating efficiencies.

Last but not the least, OYO has built a reasonably large business. If you look at our revenues, scale, etc., of course until last year, the current year numbers will be out hopefully very soon. If you look at those metrics, you will realise that for a company of this size, the amount of capital we have consumed among the young start-up ecosystem, it is not very low but at the same time, it is not dramatically higher than what a lot of other companies in the ecosystem had generally seen and will continue to try to be more capital efficient as an organisation.

Ghosh: I think the company is evolving and as the company evolves, when you are starting up, when I talked to many early-stage companies - and I don’t think we are an early-stage company anymore - but when I talked to young founders the first thing that always comes up and the question that comes up is how do you scale up, how do you grow up.

Clearly, this business model has been able to prove that we have passed that. Then last year, Ritesh started putting together the building blocks saying, how do we now put in all the other ambitions which come into play. So I think this is just an evolution.

Agarwal: It is some way linked to the scale and the aspiration. When we were a reasonably large Indian business, we started saying India needs to have high-quality corporate governance leadership and as a part of that was Aditya coming as a leader of the India business.

Now with our expansion worldwide and the scale of performance that we are seeing, we feel that breadth today doesn’t give as much upside as much as depth and as we keep going deeper in the geographies that we are already in, the immediate question that gets asked is, as you go deeper, operating efficiencies and hence sustainability and path to profitability will come but when you do that at such large scale, doing it in the right way is extremely valuable due to which corporate governance becomes valuable.

So in my view, this is a part of growing up for the company and this has been the case for the last few months. As you said, it has been – I feel that around May or June a lot of these discussions started and it is a happy feeling. Especially for me as an entrepreneur; in 2013 the question was will you survive the next week or not. It is a good evolution to move from being next week do I survive or do I have to go back to university. It has been a significant revolution and I am very thankful to have this opportunity.

Ghosh: I think we have some immediate priorities. The immediate priority is to make sure that Rohit and I work alongside together to make sure that the business consolidates and comes together under a new leadership, which is Rohit. The good news is that – I am still going to be based in Gurgaon and I am right here and I am available to the team as well as Rohit for anytime that they need to make sure that we transition it well. Even right now, my current boss is going to expect me to deliver on my December targets.

But the third is how do we start thinking about what the next money is going to look like, how do we build global capabilities and that is not just me, there are a lot of leaders out here who are now playing global roles and how do we bring that together because the sweet spot of success will be when we are able to transport these pockets of excellence into a replica which can be replicated all around the world and this whole organisation – there are different parts and different stages to it but the whole organisation – hopefully one year from now, you will come back and say yes, you talked about some of this stuff last winter and yes, you have come good.

Agarwal: But maybe next year you would be saying that, alright, you did some of these things right but why are you not growing.

Ghosh: One common thing, whenever Ritesh and I get together - and I was telling one of my colleagues just a short while ago – we have this uncanny habit, whenever we get together if we have planned an hour, it will be seven hours and we always end up missing meals and one of the other is saying aren’t you hungry, that is a very common thing. Obviously we have a lot to talk about all the time.

Agarwal: That is the whole perspective. At the outside, it feels like a much more complicated dynamic but for us here in the inside the way we think about it is that all of us came here with a common goal that is how do we build OYO into a successful company and this is related to the previous question you shared as well that we will all be available to make sure whatever is required to make OYO more successful, which is why it becomes very easy for me to be able to make these decisions and same for all our other leaders possibly because all of us say that we came here because we saw a dream that what OYO could be in the years to come.

Agarwal: I never feel that I built the company and I want to be very honest in saying that, I am very thankful that I have the opportunity to be in the key meeting rooms and the discussions, I would happily be just a fly in the wall.

Ghosh: I feel very possessive about the company.

Agarwal: I don’t. I feel that the way we think about it is saying that it is a company first and in some way OYO has been a pioneer there where we have said that in India when most companies would say that the CEO has to be the founder, I have been very happily saying that we need to bring an executive leader who can bring and make OYO more successful so that I can go pursue additional ambitions. From our perspective, at the human level, all we say is do we all fundamentally does our heart beat for the company? If the heart beats for the company, do everything that is required to make the company successful.