SoftBank might cut down OYO’s valuation by 20% to $2.7 billion, start-up calls it 'speculation'

SoftBank has slashed hospitality unicorn, OYO’s valuation by 20 per cent, Bloomberg reported citing sources. The development comes amidst reports that the start-up is preparing to make its stock market debut in January 2023. The Masayoshi Son-led fund has reportedly cut down OYO’s valuation to $2.7 billion in the June quarter from $3.4 billion earlier.

In 2019, OYO, one of the most valued start-ups in India, had a valuation of $10 billion. It is backed by the likes of Lightspeed Ventures, Sequoia India, Airbnb, Didi Chuxing, and more.

Recently, the company filed an addendum to its Draft Red Herring Prospectus submitted to the Securities and Exchange Board of India (SEBI) in September last year. In the addendum, the company revealed its financials for FY20, FY21, and FY22. It also revealed financials for the ongoing fiscal year as well.

Oravel Stays Private Limited, the parent company which owns OYO, made an adjusted gross profit of Rs 1915.9 crore in FY22 (up from Rs 1313.7 crore in FY21), and for the first quarter of FY23, it made an AGP of Rs 602.2 crore.

OYO has, however, denied the reports that its valuation has been slashed. “We are confident that the above speculations about valuation markdown are patently incorrect. Valuation is an outcome of business performance.  As per our latest audited results, we have clocked Rs7 crore maiden adjusted EBITDA profit in the June quarter, at 41 per cent gross profit margin and a 45 per cent increase in gross booking value per hotel per month versus last financial year. These are dramatically improved results and the strong performance trajectory is expected to continue. Hence, there is no rational basis for a markdown. We have not decided the exact timing for the IPO and the IPO valuation is also highly speculative,” the company spokesperson told Business Today. 

SoftBank has not commented on the same yet.

For its upcoming IPO, OYO has proposed to raise Rs 7,000 crore through a fresh issue of equity shares and an offer for sale to the tune of Rs 1,430 crore, as per its DRHP. The company was founded in 2012 by Ritesh Agarwal. Incidentally, Agarwal’s remuneration has grown by 250 percent. From Rs 1.6 crore in FY21, it jumped to Rs 5.6 crore in FY22.

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