Get All Access for $5/mo

Why Indian Unicorn OYO's Buying Back Shares has Set an Unprecedented Trend of Start-up Founders Looking to Retain Control Ritesh Agarwal, founder and CEO of OYO Rooms, has announced the buyback of his shares from investors Lightspeed Venture Partners and Sequoia Capital

By Bhavya Kaushal

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Nikkei Asian Review

The start-up ecosystem is witnessing a trend of founders taking steps to bolster their control in the company. Adding to this trend, Ritesh Agarwal, founder and CEO of OYO, has announced the buyback of his shares from investors Lightspeed Venture Partners and Sequoia Capital. This move will increase his stake in the company to 30 per cent, a major jump from the initial 10 per cent control Agarwal had in his hands.

The Competition Commission of India or CCI has given the approval for the same and also demanded the infusion of $500 million into the company. Agarwal will be financing the buyback from Japanese banks Nomura and Mizuho Bank using debt.

With this deal OYO will pocket Lightspeed Venture Partners' 13.4 per cent stake worth $1 billion and 10.24 per cent stake of Sequoia Capital valued at $500 million.

Learning from What Flipkart's Fate

Start-up entrepreneurs have gradually been realizing the need to retain control in their company. Flipkart is a reigning example of what happens when founders lose control. A 77 per cent stake by Walmart costed the Bansals the company they had built with their own sweat and toil. Cab aggregator Ola's co-founder and CEO, Bhavish Aggarwal turned down a staggering $1.1 billion from star investor Softbank to retain greater control and stake in the company. The infusion would have costed Agarwal giving away 40 per cent stake in the company.

Amit Rathi, Managing Director of Unitus Capital, says that every entrepreneur wants to retain greater control in the company.

"This move is important for wealth creation and also because entrepreneurs want to ensure that they are kept at the helm of the company's affairs." He further said that having a minority stake in the company risks them of being kicked out.

Rathi also added that if investors have faith in the way an entrepreneur is running the operations, then the latter don't have to worry about their stake.

While Bhavish Aggarwal and Ritesh Agarwal taking steps to ensure that entrepreneur's control is not diluted in the company, the trend will see an upsurge in the coming times.OYO has been on an expansion spree but it is yet to prove that its business model is profitable.

Some Raging Fires

This news has come at a time when OYO is battling the raging fires. Just last week, a first information report (FIR) was filed against Agarwal by Natarajan VRS, a Bengaluru-based hotelier accusing the OYO founder of unfair business practices. Soon after, there were reports that Bruhat Bangalore Hotels Association has had also written to the police commissioner in Bengaluru to conduct a probe against the company. OYO and hoteliers are yet to make peace on the conflict.

Bhavya Kaushal

Former Features Writer

I am a work-in-progress writer and human being. An English graduate from Delhi University, writing is my passion and currently, I was Entrepreneur India's start-up reporter. I love covering start-ups and weaving their stories into unforgettable tales with the power of ink! 
News and Trends

"45% of All Ongoing Hydropower Projects in India are Ours": Patel Engineering

Patel Engineering reported a turnover of INR 4,400 crore in the last fiscal year, with a projected 10 per cent growth for the current year.

Growing a Business

Stop the Errors: Set a Review Process That Works

Mistakes make you look unprofessional and hurt your growth. Fix them today.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Side Hustle

'Hustling Every Day': These Friends Started a Side Hustle With $2,500 Each — It 'Snowballed' to Over $500,000 and Became a Multimillion-Dollar Brand

Paris Emily Nicholson and Saskia Teje Jenkins had a 2020 brainstorm session that led to a lucrative business.

News and Trends

Aadhaar-Driven Financial Inclusion: Catalyzing Regional Economic Growth in Rural India

The emergence of digital tools such as the Aadhaar-enabled Payment System (AePS), which uses the biometric-based Aadhaar identity system for cash transfers and regular banking tasks, has become a tool to bridge the gap and improve financial inclusion

Data & Recovery

Say Hello to the Secure Cloud Storage Alternative Entrepreneurs Need

Secure, scalable, and cost-effective: Internxt is the smarter choice for cloud storage.