Hospitality startup Oyo Rooms on Friday filed preliminary papers to float an initial public offer (IPO) to raise Rs 8,430 crore. With this news, the OYO Rooms has become the first hospitality company which explored the opportunity of listing itself on bourses. According to media reports, the proposed IPO will comprise fresh issuance of shares worth Rs 7,000 crore and an offer for sale (OFS) of shares worth Rs 1,430 crore. SoftBank Vision Fund, Lightspeed Venture Partners and Sequoia Capital India are some of the investors in the companies. The start-up said it would also consider issuing shares worth up to 14 billion rupees ($193 million) in a pre-IPO placement. In the DRHP, the company made it clear that the cash generated by selling shares in the Oyo IPO will be utilised to finance prepayment or repayment of borrowings made by Oyo’s subsidiaries, funding its organic and inorganic growth initiatives, and for general corporate purposes. It intends to use Rs 2,441 crore for prepayment or repayment, in part, of some borrowings by its subsidiaries and plans to utilise Rs 2,900 crore for funding organic and inorganic growth.
According to the draft red herring prospectus (DRHP), the Oyo IPO is going to be a mix of primary and secondary shale sale: Rs 7,000 crore will be raised by issuing fresh stock and the rest via an offer for sale. In an OFS, existing investors sell their stake, in part or full. However, the price band for the offering is not disclosed in the document. According to the draft papers, investors including Agarwal, Lightspeed Venture Partners, Sequoia Capital, Star Virtue Investment (Didi), Greenoaks Capital, AirBnB, HT Media, and Microsoft will not dilute their shareholding.
Even though, OYO has submitted offer for IPO, It did not outline a timetable for its listing in its prospectus. But it is planning to debut by the end of the year. As the hospitality sector is healing after confronting with the serious setbacks emanating from the lockdowns, In March this year, the loss of the company narrowed to Rs 3,943 crore from the whopping figure of Rs 13,122 crore a year ago. Along with this, the revenue of the of the company declined by 70 per cent.
The company has incurred losses each year since incorporation, and its ability to achieve profit can be delayed. The company was valued at $9.6 billion after it raised $5 million from Microsoft in August. The offer comprises a fresh issue of equity shares worth Rs 7,000 crore and an offer for sale (OFS) of up to Rs 1,430 crore.
Hospitality startup Oyo’s business was severely disrupted by the pandemic. At one point, the startup reported that its business was down by up to 60 per cent as several nations enforced lockdowns as they scrambled to contain the spread of the virus. But it has been showing signs of fast recovery in recent weeks as some of its key markets opened up in recent quarters. The startup said in the filing today that four markets — India, Indonesia, Malaysia, and Europe — account for about 90 per cent of its overall revenue. Reorienting its business strategy, the startup today doesn’t own any hotel of its own and instead works with over 157,000 partners and helps them operate hotels, resorts, and homes. It doesn’t promise any minimum guarantees to those partners.
Last month, Oyo received a $5 million investment from Microsoft Corp. Kotak Mahindra Capital, JP Morgan and Citi are the bankers advising Oyo on the IPO, the source said. Recently, OYO struck a major partnership with Microsoft (MSFT), which will allow its hotel owners to use the software company’s cloud and artificial intelligence technology. The companies also plan to create so-called “smart room” experiences, which would offer customers self-check-in and virtual customer service options.
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