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MUMBAI : Oravel Stays Pvt. Ltd, which operates hospitality unicorn Oyo Hotels and Homes, plans to trim the size of its initial public offering after its investors dropped their plans to sell their holdings through an offer for sale, two people with knowledge of the development said.

In its draft share sale documents in October, Oyo had proposed an 8,340 crore IPO, which included an offer for sale (OFS) of 1,340 crore from shareholders SoftBank Group, Grab Holdings Inc., HuaZhu Hotels and the family office of Sunil Munjal of the Hero Group.

SoftBank Group, which owns 46% of Oyo, initially planned to sell around 2% of the company in the IPO. Southeast Asian taxi-hailing app Grab, which invested $100 million in Oyo in 2018, proposed to sell about 51.6 crore worth of shares. HuaZhu Hotels or China Lodging Holdings, which invested in 2017, proposed to sell 23.13 crore, while the family office of Sunil Munjal planned to sell shares worth 26.71 crore.

The OFS has been dropped, and the company will raise a smaller amount at a lower valuation, the people said on condition of anonymity. The company has now reduced its valuation expectation to around $7-8 billion, said one of the two people familiar with the company strategy. These changes will reflect in its updated IPO documents, the person added. Oyo is yet to receive the market regulator’s approval for the issue.

“Even this much (valuation) is generous," the other person mentioned above said.

Many companies have shelved their IPO plans because of the choppy markets caused by the Russia-Ukraine war. Indian stocks, especially newly listed internet companies, have seen significant losses in recent weeks, souring investor sentiment after a blockbuster 2021 for IPOs.

Spokespeople for Oyo and its investors did not respond to requests for comment on Tuesday.

On 17 March, Bloomberg News reported that Oyo slashed its approximately $1 billion IPO by 50% and halved its valuation from its previous $12 billion expectation. The report also said the company could shelve its offering. Reacting to the story, Oyo issued a statement “strongly denying the assertion that we are either shelving the IPO or changing valuations dramatically".

In the statement, Oyo said it “has significant cash balances, and our business performance has improved materially since the time we filed our prospectus".

“While we can’t disclose the specific financials here which will be shared in our next public documents, aided by a resurgence in travel and tourism, we have seen a strong increase in revenues and our Ebidta losses in H1 (first half) of FY22 were 66% lesser than that we witnessed in the same period last year, and we are moving towards a clear path to profitability," the company said.

In the draft documents, Oyo said it planned to use the IPO proceeds of around 2,441 crore to repay debt owed by its units, including Oravel Stays Singapore Pte Ltd, Oravel Hotels LLC and Oyo Hospitality Netherlands BV, Oyo Singapore and OHL.

The second person mentioned above said Oyo’s burn rate is around $4-5 million a month.

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