IPO-bound Oyo targets valuation of $9 billion, SEBI nod expected soon: Report

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Oyo Hotels and Homes, the parent entity of hospitality firm Oyo, is targeting a valuation of $9 billion in its initial public offering (IPO), Bloomberg reported on January 17, citing persons who are privy to the development.

The company is likely to receive the Securities and Exchange Board of India’s (SEBI) nod for its IPO round within the next couple of weeks, the sources reportedly said.

The $9 billion valuation, which they claim the startup would target, would be lower than $12 billion as initially reported in the local media.

Reports have hinted that Qatar Insurance Co (QIC), a few HNIs and family offices have bought stake in the company late last year.

Oyo founder Ritesh Agarwal, who holds 33 percent stake in the company, would not be offloading his stake through the IPO, as per the offer for sale released in October.

Besides Agarwal, Lightspeed Venture Partners, Sequoia Capital, Star Virtue Investment (Didi), Greenoaks Capital, AirBnB, HT Media and Microsoft are not diluting their shareholding.

The offer for sale comprises aggregate shares from a small part of SVF India (Softbank), A1 Holdings Inc. (Grab), China Lodging, and Global IVY Ventures LLP.

As per the draft red herring prospectus (DRHP), the unicorn plans to raise $1.2 billion (Rs 8,430 crore) through the IPO. The draft listed the prevailing COVID-19 pandemic, slow growth and dispute with rival Zostel among key risk factors.

Soon after Oyo’s DRHP was filed, Zostel had written to SEBI, calling for rejection of Oyo’s prospectus and suspension of its IPO.

Notably, Oyo had decided to raise capital through public offering last year, with Moneycontrol being among the first to report about the company’s plans in July.

The decision was made public shortly after the Softbank-backed homegrown firm announced the closure of a debt financing round of $660 million from global institutional investors such as Fidelity Investments, Citadel Capital Management and Varde Partners with an aim to retire some of its existing debts and pump up its operations and product technology.

Oyo, which is counted among India’s top startups, hit a roadblock in 2020 during the first wave of the COVID-19 pandemic. The company reported a net loss of Rs 3,929 crore in the fiscal ending in March 2021, which was still lower than Rs Rs 12,799 crore in the previous fiscal.

Recovering from the crisis, Oyo completely changed its model to a revenue share one, as compared to the earlier, where it would pay its hotel partners a minimum guarantee.

The company also adopted innovative measures in a bid to increase its customer base. Agarwal, the company’s 28-year-old leader, recently said they are “committed to making India a leading global hotspot for travellers through experiential tourism like rural homestays, replicating the Kevadia model in states like Ladakh, Haryana, Tamil Nadu and J&K.”