Zostel Turns A New Leaf In Fundraising, Pitches To Customers For Funding

Zostel Hospitality Pvt Ltd which owns two brands — budget hotel chain Zo Rooms and backpackers’ hostel chain Zostel — has turned to its customers to raise INR 10 Cr funding at a pre-money valuation of INR 75 Cr. The company has invited its patrons to turn angel investors and infuse anywhere between INR 5 Lakh to INR 1 Cr into its hostel chain Zostel.

The company’s cofounders Dharamveer Singh Chouhan and Chetan Singh Chauhan denied to comment on the development. However, Dharamveer, in an email to the customers dated September 11, said, “It is with my heartfelt pleasure that I invite you to take part in our upcoming investment round. Zostel is driven and built by a passionate community and today, extending an opportunity to you for being a part of wealth creation with Zostel is humbling for us.”

“We are raising [INR] 10 Cr at a valuation of [INR] 75 Cr pre-money as a Public Unlisted Indian Company. And you have an opportunity to invest anywhere between [INR] 5 Lakh to [INR] 1 Crore,” he further added.

Zostel has nearly 1900 beds in more than 42 locations across India and Nepal. The company also has nearly 20 bed-and-breakfasts in India with nearly 200 beds. It has served more than 2.25 Lakh travellers and 20K solo female travelers, according to the company’s website.

With the latest funding, Zostel plans to expand into 250 locations, increasing its dorms to 26,708 and the average room rate to INR 800 from INR 730. In its deck, the company also aims to achieve a break-even point 24 months after closing the round. It further aims to increase its average revenue run rate and average expense rate to INR 167 Cr from INR 4.1 Cr and INR 5 Cr, respectively, in FY20.

Zostel, in its pitch deck to customers, claimed that it has nearly 54% average occupancy rate, 70% repeat users, and 65% net promoters score (customer loyalty and satisfaction measurement). Besides this, nearly 20% of its customers are international travelers and 45% are female.

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