In an interesting development, OYO Hotels and Homes is on the verge of taking over the student residential facilities of Lovely Professional University in Punjab. It is reported that the talks are at an advanced stage and that the deal could be worth $200 million.
Owned by Mittals, Lovely Professional University is considered one of the largest in the country with a huge campus. The hostels with a range of accommodations starting from dormitories to single occupation rooms can house more than 25,000 students. The facility could include apartments too for senior students or faculty. Besides, there are gyms and an indoor stadium even.
Though there were other bidders for this asset, Oyo beat them all, it is reported. Among the others who wanted to take over this asset are HDFC, Good Host Spaces, a startup funded by Goldman Sachs and Blackstone. Either Oyo outbid them all or the Mittals felt comfortable dealing with Oyo. Neither parties have issued any official statement. The deal could be in the form of a lease and the period of lease could be quite long, running into a few decades.
The promoters are likely to utilize the funds generated from this deal to further expand the university.
The only issue being pointed out by those who are knowledgeable about this deal point out that the university management may retain the authority to decide on the rent and other charges being collected from the students by Oyo. This might restrict the legroom available to Oyo. The report gives out certain figures. It is said the facilities generated a net operating income of $23 million last year and an overall gross revenue of $30 million.
Oyo already has a model of managing rental accommodation for the youth and professionals with its Oyo Life brand and this massive addition of a student accommodation facility can open another avenue for it. There are other players like Stanza Living and Oxfordcaps in the student accommodation space both being startups. According to one study, the business for providing student accommodation in Indian universities can be put at around $50 billion and there is still a large demand-supply gap to be filled. Oyo may gave taken a huge stride forward in that direction with this LPU deal.
For Oyo last valued at $10 billion, this business comes on the heel of several new additions to its portfolio, the last high profile one being the acquisition of Hooters Casino Hotel in Las Vegas.