Ritesh Agarwal, the founder and chief executive officer of Oyo Hotels and Homes, will invest $2 billion to buy back a part of the equity holdings of the company’s early investors Lightspeed Venture Partners and Sequoia India, besides infusing more equity capital into the firm.
The founder-led management purchases are being made through RA Hospitality Holdings (Cayman), the company said in a statement on Friday.
The transaction will take up Agarwal’s stake in Oyo from nearly 10% to 30%, said a person with direct knowledge of the transaction, requesting anonymity. He added that the company’s valuation now stands at $10 billion. Sequoia Capital and Lightspeed Venture Partners will take home returns of over $500 million each from the partial stake sale, this person added.
Sequoia Capital held a 10.24% stake in Oyo, while Lightspeed had a 13.4% stake. It is not clear how much of their stakes they have sold in the latest transaction.
Agarwal’s investment, backed by global institutional banks and his financial partners, is subject to regulatory and shareholder approvals.
“It is a very exciting time for Oyo right now as we make great living spaces come alive across all corners of the world from Texas to Tokyo," said Agarwal in a statement.
Oyo Hotels and Homes has seen a 4.4x year-on-year revenue growth in June, with 1 million rooms under management across hotels and homes. It has over 200,000 rooms in India.
Earlier this month, Oyo had said that it has emerged as the world’s third largest hotel chain in terms of room count, with US and Europe emerging as its strong growth drivers. It claims to have a balance sheet of about $1.5 billion.
Founded in 2013, Oyo has attracted some of the world’s leading investors, including Airbnb, SoftBank Vision Fund, Lightspeed Venture Partners, Greenoaks Capital, Sequoia India and Hero Enterprise.
“It’s been five years since Sequoia India first partnered with Ritesh and his team. Today, our footprint stands at 1 million rooms across India, China, South-East Asia, Europe and, now, the US. This is the kind of stuff startups and ventures investing dreams are made of. We remain committed to supporting this world-class management team, as they continue to create living spaces across the world," said Mohit Bhatnagar, managing director, Sequoia Capital India Advisors.
The buyback is a part of a larger fundraising plan, including for a public offering. Earlier this month, Mint reported that Oyo, India’s most valuable hotel chain, is preparing for an initial share sale within the next two-three years. “The buyback is thus a part of the plan to have SoftBank, the founder and one more investor," said Vivek Durai, founder of business signals platform Paper.vc.
SoftBank is Oyo’s largest shareholder with an over 45% stake.
Earlier this week, Oyo Hotels had confirmed its acquisition of Innov8, a co-working spaces provider, highlighting the company’s increasing focus on the fast-growing segment.