Companies
General Atlantic, Norwest eye stake in Oyo
Summary
The global funds are currently carrying out due diligence, after which binding bids may be submitted, said people with knowledge of the development
Mumbai: Private equity (PE) firms General Atlantic (GA) and Norwest Venture Partners are in talks with investors in Oravel Stays Pvt. Ltd to pick up a stake in the hotel operator, two people with knowledge of the development said.
Oravel operates the hospitality tech firm Oyo Hotels & Homes. Apart from founder Ritesh Agarwal, its top investors include Peak XV Partners (formerly known as Sequoia Capital India), Lightspeed Venture Partners and SoftBank.
“Some early investors are being approached to offer their stakes. The incoming investors are seeking a large secondary portion. A deal is more certain if there is a large portion up for grabs," said one of the people cited above.
Avendus Capital is advising Oyo on the transaction.
The SoftBank-backed troubled hotels aggregator has been able to script a turnaround, leading to heightened interest among new investors, these people said. Some existing investors may also find it amenable to sell now as the initial public offering (IPO) has been delayed, they added.
“No term sheets have been signed," the second person cited above said.
The global funds are currently carrying out due diligence, after which binding bids may be submitted, the people said.
Avendus and Oyo did not respond to a request for comment.
When contacted, spokespeople for Peak XV Partners and Lightspeed Venture Partners said they were not selling their stakes.
General Atlantic and Norwest Venture Partners did not immediately respond to a request for comment.
On Thursday, Bloomberg reported that Oyo is in talks to refinance a $660 million term loan and is seeking to extend the loan’s maturity to five years compared with the existing 2026 deadline.
An Oyo spokesperson told Bloomberg it “regularly get(s) approached for cheaper financing options, but the company’s board hasn’t approved anything, including prepaying some portion."
Oyo, which has a presence across Asia, the US and Europe, made a pre-filing with the markets regulator, the Securities and Exchange Board of India (Sebi), in March this year in its second attempt to go public. Under the pre-filing route, the details of a company’s prospectus are kept confidential until it decides to proceed with the offer. Sebi has not yet approved the company’s IPO.
In December, Sebi returned Oyo’s draft papers—first filed in early 2022—and asked the company to refile with several updates. At the time, Oyo sought to raise ₹8,340 crore, including a secondary offering of ₹1,340 crore.
Since then, its profitability has increased.
On 31 May, Fitch Ratings revised its outlook on Oravel Stays to positive and rated its $660 million term loan at ‘B-’.
“The outlook revision reflects our view that Oyo is on track to generate positive Ebitda (earnings before interest, taxes, depreciation and amortization) and cash flow from operations sustainably," said Fitch.
“This follows positive Ebitda in every quarter of the financial year ended March 2023 (FY23), which is the first year of profits since Oyo’s incorporation in 2012. We expect significant growth in its Ebitda in FY24, led by an ongoing demand recovery in the travel and tourism industry, the company’s stable gross margins, and a reduction in operating costs."
Oyo is looking to raise $400-600 million in its IPO, Mint has reported. The offer-for-sale portion in the IPO is not known. This is almost half of its initial plan to raise $1.2 billion via the public markets.
Founder Agarwal has told employees that Oyo’s operating revenue stood at ₹5,463 crore in FY23, a 14% increase from ₹4,781 crore in the previous year, according to a 26 September Inc42 report. The startup also narrowed its loss by 38% to ₹1,286 crore in FY23 from ₹1,939.8 crore in the previous fiscal year, it added.
