oyo

OYO Rooms and Its Upcoming IPO: Key Details

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Oyo Rooms

OYO, also known as OYO Rooms, is a global hospitality brand that originated in India. Founded in 2013 by Ritesh Agarwal, OYO has rapidly grown into one of the largest networks of hotels, homes, and spaces. 

The company offers affordable accommodations to travelers and has expanded across several continents, including Asia, Europe, and North America. 

OYO’s mission is to provide quality living spaces for all, ensuring consistency and affordability for tourists and business travelers.

Initially launched as a budget hotel aggregator, OYO quickly moved beyond providing hotel rooms. 

Today, it offers many properties, including vacation homes, guesthouses, and co-living spaces, making it a key player in the global hospitality industry. 

The company operates through franchising and leasing, ensuring consistent service standards across its vast portfolio.

Oyo Rooms

OYO's Upcoming IPO: Key Details

OYO’s much-anticipated Initial Public Offering (IPO) has attracted significant attention because it is one of India’s largest tech-driven hospitality platforms. 

The IPO is expected to be a major event in the Indian stock market in 2024, with investors closely watching how the company positions itself for future growth amidst a challenging business environment.

Size of the IPO

OYO plans to raise ₹8,430 crores ($1 billion) through its IPO. The funds are expected to be divided into two parts:

1.    Fresh Issue: A portion of the IPO will be a fresh issue of equity shares, where OYO aims to raise approximately ₹7,000 crores. The fresh capital will be primarily utilized for debt repayment, technology upgrades, and future expansion into international markets.

2.    Offer for Sale (OFS): The remaining amount, roughly ₹1,430 crores, will be from an Offer for Sale, where existing shareholders, including early investors, will sell their stakes. Major stakeholders, such as SoftBank and Sequoia Capital, might sell part of their holdings during the IPO to realize profits on their early investments.

IPO Pricing and Valuation

  • Price Band: The IPO price band is expected to be set between ₹400 and ₹450 per share, but this could be adjusted closer to the launch depending on market conditions. OYO’s final valuation post-IPO is projected to be between $9 billion and $10 billion.
  • Share Dilution: The offering is likely to result in a dilution of 10-15% of the company’s shares. This move could impact the ownership structure, with early investors like SoftBank, Sequoia Capital, and Ritesh Agarwal (OYO’s founder) seeing changes in their stake percentages.

IPO Timeline

OYO’s IPO is expected to be launched before the end of 2024. The company is currently finalizing regulatory clearances with the Securities and Exchange Board of India (SEBI). 

Once approved, the public offering will hit the Indian stock exchanges—National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Financial Overview

OYO’s financial journey has been marked by rapid expansion, followed by periods of financial stress. Here is a summary of its key financials leading up to its IPO:

  • Revenue: In the fiscal year 2023, OYO reported revenue of approximately ₹5,700 crores ($700 million), showing a recovery from the pandemic-driven downturn, but still far from pre-pandemic highs.
  • Losses: The company reported a net loss of ₹1,500 crores ($190 million) in the same fiscal year. While this reflects an improvement compared to earlier losses, achieving profitability remains a key challenge for the company.
  • Operating Metrics: OYO claims to have significantly improved its occupancy rates, especially in markets like India, Southeast Asia, and Europe. It attributes this improvement to better property management systems and technology.
  • Valuation: As of 2024, OYO is valued at around $9-10 billion, down from a peak valuation of $12 billion during its aggressive expansion phase. This decline is attributed to the pandemic and market corrections.
  • IPO Plans: OYO plans to raise around $1 billion through its upcoming IPO. The proceeds will primarily be used for debt repayment, expansion into new markets, and strengthening its technology infrastructure.

Anchor Investors

OYO’s IPO has garnered interest from several prominent institutional investors, including sovereign wealth funds, private equity firms, and global mutual funds. 

These investors are expected to take up significant portions of the IPO during the anchor investor allotment phase, which typically happens a day before the issue opens to the public.

Road to IPO: A Bumpy Journey

OYO first filed for its IPO in October 2021, but due to the COVID-19 pandemic and volatile market conditions, the company postponed the offering multiple times. 

Since then, OYO has worked to restructure its business, focusing on cutting operational costs, improving profitability, and reducing cash burn.

The company also underwent scrutiny from regulatory bodies such as SEBI, which requested more financial transparency and clarification on its revenue model. 

OYO has since revised its draft red herring prospectus (DRHP) multiple times to provide more detailed disclosures about its business, including key risk factors.

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Conclusion

OYO’s upcoming IPO presents a unique opportunity for investors to buy into a well-known brand with significant global reach. 

However, with concerns over its financial losses, competition, and market challenges, the IPO also carries some risks. 

The success of the offering will largely depend on investor sentiment, the pricing of the shares, and how OYO continues to manage its operational and financial risks in the competitive global hospitality industry.

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