OYO, a major player in the hospitality industry, is reportedly in talks to raise a down round at a valuation of $2.3 billion, down 77% from its peak $10 billion valuation back in 2019.
According to a report from The Arc, the Ritesh Agarwal-led startup is in talks with the financial services firm InCred to secure approximately $80 million to $90 million from family offices. The hospitality giant is said to be open to receiving commitments of at least $2 million each from investors within InCred’s network.
The OYO company spokesperson refrained from commenting on the issue. However, a company spokesperson informed The Arc, “This information is incomplete and inaccurate. Our current priority is refinancing our existing debt, which is poised to greatly enhance our profitability.”
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InCred reportedly proposed that OYO establish a special purpose vehicle (SPV) aimed at facilitating investments from affluent individuals and family offices into the company. A portion of the funds will be allocated to clearing the debt of the company preparing for its IPO, with the remainder earmarked for bolstering growth initiatives.
According to a source familiar with the matter, InCred organized a conference call with founder and CEO Ritesh Agarwal, which saw the participation of nearly 100 investors, as reported by The Arc.
What’s intriguing is that during the call, the company’s management purportedly disclosed to investors that the round’s total size would be $150 million, with half of it sourced from an undisclosed sovereign wealth fund. Additionally, OYO is reportedly considering a public listing within the next 12 to 24 months.
Although the fund’s name remains undisclosed, earlier reports have indicated that OYO has been engaged in discussions with the Malaysian sovereign wealth fund, Khazanah Nasional Berhad, since at least the beginning of this year.
During the call, investors purportedly pressed Agarwal for further details regarding his strategy for resolving the $2.2 billion debt secured from Japan’s Mizuho and Nomura in 2019. Over the past three years, this debt has been adjusted to a quasi-equity segment amounting to $950 million as of 2022, which must be reimbursed within a 10-year timeframe. An installment of $383 million is expected to be settled by 2027.
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This development comes in the wake of reports suggesting that OYO was contemplating raising up to $450 million through the sale of dollar bonds as part of a refinancing effort led by JP Morgan.
Consequently, reports indicate that the company has approached the market regulator Securities and Exchange Board of India (SEBI) to retract its IPO documents, intending to submit a revised draft red herring prospectus after completing the financing round. The SoftBank-backed startup, resubmitted its IPO draft via a confidential route last year, aiming to garner between $400 million to $600 million from the public markets. This sum is notably lower than the initial $1.2 billion IPO target set in 2021.
Established in 2012 by Ritesh Agarwal, OYO provides a range of accommodations including vacation rentals, coworking spaces, economical hotels, and corporate lodging. To date, the startup has secured over $3.5 billion in funding, with notable investors including SoftBank, Peak XV Partners, and Microsoft.
The startup reportedly concluded the financial year 2023-24 (FY24) with operating revenues amounting to $700 million. Meanwhile, its adjusted EBITDA, excluding ESOP costs and interest payments on debt, surged threefold year-on-year (YoY) to $110 million.
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