SoftBank-backed hospitality major OYO is reducing the shares it targets to sell through a stock-market debut by about two-thirds, according to Bloomberg.
Citing two people privy to the development, the news agency said the company is preparing to file a fresh initial public offering (IPO) document as soon as this week. In the filing, OYO will outline plans to sell just a third of the new shares it originally planned, eroding the amount of fresh capital it is expected to receive, one of the sources told Bloomberg.
The plan shows how founder Ritesh Agarwal (29) is trying to push through an IPO even at weaker terms to alleviate the financial pressures on the hotel and lodging booking company and himself. While the travel market has improved from the pandemic-era trough, OYO — once valued around $10 billion as India’s Airbnb-equivalent — is still reporting mounting losses. Agarwal, meanwhile, took on billions of dollars of debt to boost his holding in the firm.
The situation remains fluid and Agarwal or OYO may still fine-tune their targets. It’s the second attempt at an IPO by the SoftBank Group Corp.-backed start-up, after India’s stock market regulator raised multiple red flags on its earlier try in late 2021. Since then, valuations of technology companies have declined after accelerating inflation and rising interest rates left customers with less to spend and raised concerns of a potential recession.
No shares will be offered for sale by OYO’s current investors, the people said. SoftBank holds about half of the start-up, which is formally called Oravel Stays Ltd. and also counts Airbnb Inc. among its backers.
The company was targeting a valuation of about $9 billion and updated its IPO documents in early 2022, but SoftBank later that year reduced its estimate for OYO to $2.7 billion. The IPO valuation will be finalised through a book-building process nearer to the listing but it’s set to be far from what the company originally envisaged.
Meanwhile, the firm estimates its revenue in FY23 to be more than Rs 5,700 crore, up 19 per cent from Rs 4,780 crore it had recorded in FY22, according to its Founder and Group CEO Ritesh Agarwal.
At a town hall on Monday, Agarwal told employees of the firm that OYO is aspiring to reach adjusted EBITDA of nearly Rs 800 crore in the next financial year, according to PTI. Sustained growth in India, Indonesia, the US and the UK and relevant optimisation as well as synergies in its European vacation homes business have led to better financials of the company, he said in a presentation at the gathering with employees.
Agarwal said OYO’s revenue for FY23 is expected to be over Rs 5,700 crore, up around 19 per cent from the Rs 4,780 crore achieved in FY22. He outlined that the key focus areas of OYO in the calendar year 2023 will be on Profit after Tax (PAT) along with consistent momentum in EBITDA; achieve cash flow positive in FY24; cost efficiency and improving contribution margins and making storefront additions, among others.