OYO files DRHP for $1.2 billion IPO; Founder, Not Major Investor

OYO files DRHP for $1.2 billion IPO; Founder, Not Major Investor

The COVID-19 pandemic may have battered the hospitality sector across the globe, but that hasn’t stopped Ritesh Agarwal-led Orawell Stages (OYO) from going public through an initial public offering (IPO).
The Gurugram-based travel technology company on Friday filed a draft red herring prospectus (DRHP) for its Rs 8,430 crore ($1.2 billion) IPO with the Securities and Exchange Board of India (SEBI). According to sources, Oyo is looking for a valuation of $11-12 billion.


The company was valued at $9.6 billion in August after raising $5 million from Microsoft. The offer includes fresh issue of equity shares worth Rs 7,000 crore and offer for sale (OFS) of up to Rs 1,430 crore.
According to the draft papers, investors including Agarwal, Lightspeed Venture Partners, Sequoia Capital, Star Virtue Investment (Didi), Greenox Capital, Airbnb, HT Media and Microsoft will not reduce their shareholding.
DRHP has named Agarwal, RA Hospitality Holdings (Cayman) and SVF Holdings (Cayman) as the main promoters of Oyo. Agarwal and RA Hospitality hold 33.15 per cent stake in the company, while SVF Holdings holds 46.62 per cent.
The OFS includes aggregate shares from SVF India (SoftBank Vision Fund), A1 Holdings (Grab), China Lodging and a small portion of Global IVY Ventures LLP.
Aggarwal, just 27, increased his stake in the company to 30 per cent in 2019 by buying shares from early investors Lightspeed Venture Partners and Sequoia India, which continue to back Oyo.
RA Hospitality Holdings (Cayman) signed a $2 billion primary and secondary management investment round backed by global institutional banks and Agarwal’s financial partners. A deal like this, where a founder brings back stake from early investors before an IPO, has few similarities, if any.
According to DRHP, Oyo plans to use the net proceeds to repay loans taken by some of its subsidiaries, to fund organic and inorganic development initiatives and for general corporate purposes. It intends to use Rs 2,441 crore for prepayment or repayment, partly some borrowing by its subsidiaries and plans to use Rs 2,900 crore for financing organic and inorganic development.
The documents said the company and its stakeholders may consider a further issue of equity shares of up to Rs 1,400 crore in consultation with the key managers.

financial situation


Taking the company public has been an exhausting affair for the company, which restructured its business in 2019 as it began to slow down following ambitious expansion plans to enter international markets.
The company streamlined strategic and shared services such as revenue management, supplies, human resources, legal and finance from country teams to regional teams to reduce costs.
As a result, its adjusted gross profit margin increased from 9.7 per cent in FY 2019-20 (FY20) to 33.2 per cent in FY20, along with a reduction in EBITDA deficit by about 79 per cent from FY21 to FY21.
Revenue in FY21 was Rs 4,157 crore, which is almost 70 percent less than the previous year. The net net comprehensive loss after tax for FY21 was also reduced by 70 per cent to Rs 3,928 crore. The consolidated borrowings stood at Rs 4,890.6 crore as on July 31.
Over the past year, OYO has implemented a number of measures as part of its COVID-19 response strategy, including adapting technology and products and transforming its offerings to accelerate growth and reduce operating costs. This also means that it has changed the way it operates with 157,000 hotels and homestays.
In DRHP, the firm says its app has been downloaded over 100 million times and its major focus is India, Malaysia, Indonesia and Europe.
The Global Coordinators and Book-Running Lead Managers of the offer are Kotak Mahindra Capital, JP Morgan India and Citigroup Global Markets India. The book-running lead managers are ICICI Securities, Nomura, JM Financial and Deutsche Equities India.

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