“The company has been discussing this (withdrawal) for some time now and it’s near imminent… all key stakeholders have been informed,” said one of the people, adding that Oyo has simultaneously begun conversations with private market investors to raise new cash over the next six to eight months.
In a response to emailed queries by ET, Oyo said the information “is inaccurate and has not been confirmed by the company representative or our IPO bankers or counsels.”
Oyo’s first public offer filing was returned by the markets regulator in January 2023, requiring the SoftBank-backed firm to refile its draft red herring prospectus (DRHP) with updates and revisions.
The startup then made a confidential pre-filing with Sebi for a significantly smaller-sized IPO. Oyo was among those directed to refile applications with a smaller secondary share sale portion than initially planned. This was a significant reduction in the case of the startup, said people in the know.
ETtechDiscover the stories of your interest
Strategic Advisor Rajnish Kumar Leaves
Oyo’s response to ET also said, “The pre-filed draft red herring prospectus dated March 30, 2023, is not available in the public domain. Further, any communication/correspondence between the company, bankers and/or Sebi is confidential. You are requested to refrain from referring to any such communication/correspondence.”
In another development at the Gurgaon-headquartered firm, former SBI chairman Rajnish Kumar has left the position of group strategic advisor at Oyo after his contract ended in December 2023, people briefed on the matter said. Kumar, who had joined in December 2021, declined to comment on the matter. He is the chairman of the board at BharatPe and also on the advisory council of troubled edtech Byju’s.
SoftBank owns 46% in Oyo, while chief executive Ritesh Agarwal has a 33% stake. Lightspeed and Peak XV Partners are among its other investors. SoftBank was listed as a promoter during Oyo’s first draft IPO filing.
Oyo has $200-250 million cash in the bank, having reduced its operating burn significantly, according to people aware of its financials. The company raised $660 million in term loan B in July 2021, which is due to be paid back late in 2025. “They (Oyo) have improved operating profitability but will need to raise some funding linked to the payout of the loan in 2025,” said a second person in the know.
In an address to employees earlier this month, Agarwal said the firm expects to improve further on the Rs 30 crore net profit it clocked during the third quarter of FY24, after the second quarter saw it come into the black for the first time.
Finding Funding
A report by Bloomberg on January 25 said Oyo had engaged with Malaysian sovereign wealth fund Khazanah Nasional Berhad to raise $400 million at a valuation of $6 billion. The company has held talks with at least two other investors, but those are at an early stage, a person in the know said.
SoftBank — Oyo’s largest investor — slashed its value to $2.7 billion in 2022, from $3.4 billion earlier. These valuations were private and not made public by the Japanese investor. The hospitality firm’s last reported valuation was over $9 billion.
Oyo’s revised filing sized its IPO at 40-60% of the original proposal of $1.2 billion, or Rs 8,430 crore (conversion rates as of that time). Of this, it was expected to raise Rs 7,000 crore in fresh issue while the remaining was an offer-for-sale (OFS). The OFS component was expected to see the likes of SoftBank, China Lodging and Hero Enterprise’s Sunil Kant Munjal part-sell stake.
Oyo’s reconsideration comes amid several new-age companies planning for public listings over the next year. These include omnichannel retailer FirstCry and electric vehicle maker Ola Electric, as well as venture-backed firms such as Swiggy, OfBusiness and Lenskart.