OYO’s Profitable Paradox: How India’s Most-Watched Startup Made Money by Shrinking

In FY24, OYO did something it had never done in a decade of existence: it turned a profit — ₹229 crore of it. It was the headline every business paper ran.

Here is the line none of them led with: that same year, OYO’s revenue fell.

That single contradiction — profit up, sales down — is the key to understanding what OYO actually is in 2026. Read through its filings from FY22 to FY25 and you don’t find one company. You find three, worn in sequence like a set of clothes: the blitzscaler that torched cash, the cost-cutter that manufactured a profit, and the leveraged acquirer now betting its future on American motels.

This is where the money comes from, where it goes, and what the coming IPO is really asking you to buy.

The arc, in one table

All figures consolidated, ₹ crore.

FY22 → Revenue 4,781 | EBITDA (480) | PAT (1,941) | GBV 8,101

FY23 → Revenue 5,464 | EBITDA 257 | PAT (1,287) | GBV 9,559

FY24 → Revenue 5,389 | EBITDA 888 | PAT 229 | GBV ~10,600

FY25 → Revenue 6,253 | EBITDA 1,083 | PAT 245 | GBV 16,250

On the surface, a textbook turnaround: a ₹1,941 crore loss becomes a profit, EBITDA swings from deeply negative to over a thousand crore, gross booking value nearly doubles. A machine that finally works.

The surface is not the story. Each step up came with an asterisk.

Asterisk one: the first profit came from cutting, not growing

Look at what actually moved between FY22 and FY24. Revenue in the maiden-profit year didn’t rise — it slipped about 1.4%, from ₹5,464 crore to ₹5,389 crore. What changed was the cost base. Operating expenses — employee and general-administrative spend — were cut roughly in half, from ₹1,617 crore to ₹817 crore. Gross margin widened from 40% to 46%.

In plain terms: OYO’s first profit was an act of subtraction. Ritesh Agarwal’s own AGM commentary frames it as “transformation,” and operationally it was disciplined work. But it is important to be precise about the mechanism. A company that earns its first profit by growing is telling you the model works. A company that earns it by shrinking is telling you the old model didn’t, and that it has stopped the bleeding. Those are different investment stories. Real top-line growth only returned in FY25 — and largely through acquisition, not the core business.

Asterisk two: not all of the profit is cash

The FY25 reported net profit of ₹245 crore deserves a closer read. Strip out deferred tax credits and exceptional gains and the underlying picture is materially weaker — by some analyses the group ran a pre-tax loss once those one-time items are removed. The India operating entity is the clearest example: it reported a modest pre-tax number but a much larger post-tax profit, flattered by a deferred tax credit of roughly ₹420 crore.

Recognising deferred tax assets against a history of losses is entirely legitimate accounting. But it is non-cash and non-recurring — an accounting event, not a cash event. When a company’s reported profit leans on a tax credit, the headline number and the cash reality drift apart, and any serious reader has to hold both in view.

Where the money actually comes from

For all the noise, OYO’s earnings resolve into three streams (FY25):

Selling room nights — ₹3,825 crore. Accommodation OYO sells directly. The largest single line, and the business most people picture when they hear the name.

A cut from partner hotels — ₹1,562 crore. Commissions and royalty income. OYO is less a hotel chain than a franchise-and-technology platform: it connects property owners to guests, runs the operational layer, and takes a share.

Fees, rent and food — ₹866 crore. Cleaning and damage fees, rental income, management fees, and a small but fast-growing food-and-beverage line.

That totals the ₹6,253 crore of revenue. The quieter structural story sits underneath it: India now contributes only a minority of OYO’s revenue — a striking inversion for a company whose entire identity was built on budget Indian hotels. The centre of gravity has moved to the United States and Europe.

Where every rupee goes

Follow that ₹6,253 crore down the page:

Running the hotels consumes about ₹3,130 crore.

Salaries take roughly ₹569 crore.

Marketing, technology and everything else, about ₹1,471 crore.

That leaves ₹1,083 crore of operating profit (EBITDA) — the number the turnaround story is built on.

And then comes the line that reframes everything.

Asterisk three: the $830 million bet

In FY24, OYO told a deleveraging story — roughly ₹1,600 crore of debt voluntarily repaid, net leverage coming down. Then in FY25 it reversed course and re-levered hard, to buy G6 Hospitality, the American operator of the Motel 6 and Studio 6 brands. The acquisition financing was refinanced into an $830 million Term Loan B maturing in 2029, rated by all three major agencies.

The consequence shows up immediately in the cost of that debt. FY25 finance costs came in around ₹959 crore — against EBITDA of ₹1,083 crore. In other words, interest now consumes close to 90% of OYO’s operating profit. Of the thousand-plus crore the business earns after running costs, only around ₹124 crore survives the interest bill. Tax credits do the rest of the lifting to reach the reported ₹245 crore.

This is the pivot the whole company now turns on, and it can be said in one sentence a first-time reader will understand:

OYO borrowed $830 million to buy Motel 6. If Motel 6 earns enough to cover the interest on that loan, OYO stays profitable and lists strong. If it doesn’t, the profit you just saw disappears.

That is the bet. Everything else is detail.

The early signs are the bulls’ best argument: US operations have quickly become the group’s largest market and, by recent disclosures, generate more pre-tax profit than the rest of the business combined. Gross booking value jumped sharply once G6 was in the fold. If US extended-stay economics hold, the loan services itself and the acquisition looks inspired.

The bears point at the same structure and see fragility: a business whose reported profit is a thin residue left after interest and lifted by tax credits, riding on the integration of a large cross-border acquisition with its own leadership turnover — plus a European book that still carries painful losses, including a Netherlands vacation-homes entity deep in the red.

Everything points at an IPO

The corporate signals are unambiguous. The parent has been rebranded to PRISM, the classic holding-company cleanup that precedes a listing. A former securities-regulator chairman sits on the board. Pre-IPO placement mechanics are already drafted into the company’s instruments. This is OYO’s third attempt at public markets after false starts in 2021 and 2023, and this time it moves through the parent entity via the confidential pre-filing route.

The valuation being discussed — in the $7–8 billion range — is far below the $12 billion of 2019, but well above the lows of 2024. Whether that is cheap or expensive depends entirely on one variable: whether the forward EBITDA trajectory, heavily dependent on G6, proves real.

The bottom line

OYO reads as three companies in sequence: the blitzscaler that lost ₹1,941 crore, the cost-cutter that manufactured its first profit on shrinking revenue, and the leveraged acquirer betting an $830 million loan on Motel 6’s cash flows.

The bull case is real — genuine EBITDA, a vast customer base, presence across dozens of countries, and strong recent quarters. The bear case is equally real — interest devouring operating profit, profit quality propped up by tax credits, and integration risk on the acquisition the entire thesis depends on.

For anyone weighing the IPO, the analysis reduces to a single question, and it isn’t about India at all. It’s whether a chain of American motels can pay for the loan that bought it.

This analysis was produced by Black Bear Labs from primary filings — annual reports, financial statements, and regulatory disclosures. It is commentary for informational purposes, not investment advice. Figures are drawn from FY25 consolidated accounts and may be restated in the company’s audited IPO prospectus.

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