Oyo may file for $1.2 bn IPO next week

Indian budget hotel chain startup Oyo is aiming to file for an initial public offering as soon as next week, joining a small group of companies in the world’s second-largest market that are exploring the public markets.

The seven-year-old startup, founded by 27-year-old Ritesh Agarwal, is hoping to raise as much as $1.2 billion in primary and secondary sales in the IPO and is focusing on a valuation of over $12 billion.

Food delivery service Zomato, payment app Paytm, and e-commerce company Nykaa are among the other high-profile Indian businesses that have recently filed for IPOs, with ride-sharing company Ola looking to fall into line.

In the travel and hospitality market, OYO will now follow the lead of ixigo, a Gurugram-based firm that has filed its DRHP and is on track to achieve INR 1,600 crore in an IPO. Another online travel portal, EaseMyTrip, went public earlier this year for INR 510 crore.

SoftBank [which owns a 46% share in the company], Airbnb, and Lightspeed Partners are one of OYO’s investors, while the company received a $5 million strategic investment from Microsoft last month. Following that, the two businesses signed a multi-year strategic agreement to co-develop next-generation travel and hospitality products and services, despite reports that Microsoft is valuing OYO at $9 billion ahead of the IPO.

In July of this year, Oyo raised $660 million in debt funding from global institutional investors, including Fidelity Investments.  It was valued at $9.6 billion after Microsoft Corporation invested about $5 million (around Rs 37 crore) in the company.

The South Asian startup, which is one of the most valued in the country, has created some kind of operating system to assist hoteliers in accepting digital bookings and payments. Oyo’s technological stack assists hotels in determining the best room rates, as well as discoverability and integrations with third-party hotel booking sites like booking.com and MakeMyTrip.

Oyo, like most others in the travel and hospitality industry, was hard hit by the pandemic but has made tremendous progress in recent months.

The majority of the startup’s revenue comes from a few nations, such as India, Malaysia, Indonesia, and Europe, which have eased their lockdown restrictions as more people are vaccinated.

Ritesh Agarwal, the founder, and CEO of OYO had earlier hinted that his company would consider going public through an IPO, but he declined to provide a date. JP Morgan, Kotak Mahindra Capital, and Citi have been selected to advise OYO on its initial public offering.

OYO was giving 4,333 bonus equity shares to 12 equity shareholders, including its founder Ritesh Agarwal, OYO’s parent firm RA Hospitality Holdings, SoftBank, Sequoia Capital, and others, before its IPO.

After the investment from Microsoft and HT Media, sources told that releasing bonus shares was part of a capital restructuring effort. In exchange for 5 equity shares and 80 preference shares as Microsoft invested $5 million in OYO.

Agarwal said the company was “already operating as a public company,” but he wouldn’t confirm if it was intended to go public anytime soon. The company hasn’t said anything else about an IPO.

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