In recent news, Indian hospitality start-up Oyo filed preliminary papers with SEBI for an initial public offering worth Rs. 8,430 crores last week. Parent company Oravel Stays confirmed that the hotel chain aims to raise around $1 billion from this IPO. Part of this sale will comprise a fresh issue of shares. The rest will constitute an offer for sale by existing shareholders of the company.
Details of Oyo IPO at a Glance
The draft red herring prospectus (DRHP) reveals the following details of this potential IPO –
- The initial share sale will consist of a fresh issue of equity shares worth Rs. 7,000 crores.
- The OFS in this IPO will be of Rs. 1,430 crores.
- The OFS will be conducted by company stakeholders Airbnb Inc., SoftBank Group Corp., founder Ritesh Agarwal and RA Hospital Holdings.
Oyo plans to list itself on the Indian stock exchanges by the first half of next year.
Financials of Oyo Hotels & Homes
Here is a brief overview of Oyo’s financials for the current fiscal year –
- The company’s total income stands at Rs. 4,157 crores as of now.
- Its total loss for this period was Rs. 4,102 crores, which is substantially lower than that of 2020.
- The start-up reported its adjusted gross profit for the latest fiscal year to be Rs. 13.2 billion.
How Does Oyo Plan to Use Its Net IPO Proceedings?
The hotel chain plans to use funds raised by its potential IPO to address existing financial obligations.
These mostly comprise outstanding debts payable to subsidiaries, including Oyo Singapore, Oravel Hotels LLC, Oravel Stays Singapore Pte Ltd and Oyo Hospitality Netherlands BV. The company plans to allocate Rs. 2,441 crores from its IPO proceeds for this purpose. Other liabilities that the company plans to meet with these funds may also include mergers and acquisitions.
Know About the Company in Detail
Also known as Oyo Rooms, Oyo Hotels & Homes is a multinational OTA that started in India. It was established in 2013 by Ritesh Agarwal. He invested borrowed funds in this start-up worth $2 billion in 2019, enhancing his holding in the company up to 3 times.
Currently, Agarwal and his holding company RA Hospital Holdings have a combined stake of 33% in this business. On the other hand, company promoter SoftBank holds a 46% stake in the company.
Oyo is currently the 3rd most valuable start-up in India, with its last reported valuation standing at $9 billion as per CB insights. Plus, Microsoft Corp. invested $5 million in Oyo last month. According to the DRHP, its loyalty program currently has over 9 million users, while its mobile application records about 100 million downloads.
How Would an Initial Share Sale Benefit Oyo?
The hospitality and travel industries were probably the worst hit by the Covid-19 pandemic. The consecutive lockdowns resulted in massive losses worth Rs. 11,079 crores for Oyo in 2020.
However, the hospitality unicorn managed to recuperate its losses quite fast due to operations resuming in key countries, including Europe, India, Malaysia, and Indonesia. This is evident from its dramatically lower losses in 2021.
A successful listing will only help the company generate massively higher profits and a greater valuation. This estimate is given its current popularity with the above-mentioned countries housing over 90% of the hotels listed on the platform of Gurgaon-based Oyo.
Oyo is the latest Indian firm to hop on to IPO listing trend, after Zomato, Nykaa, Ola, and Paytm. Currently, a major hurdle for the company is its legal controversy with competing home and hostel network, Zostel. Now, it is only a matter of time to see whether the company receives the markets regulator’s nod for this initial share sale.
Frequently Asked Questions
- Who will be the BRLMs for Oyo’s potential IPO?
Oyo has appointed Citigroup, Kotak Mahindra Capital, Nomura & Bank of America, and ICICI Securities to be the managers for its probable IPO.
- When will Oyo launch its IPO?
Oyo has not yet announced its IPO launch date.
- Where will the Oyo IPO shares be listed?
Oyo IPO shares will be listed on NSE and BSE.