Oyo’s IPO Prospectus: All you must know about company financials, future plans

Oyo Rooms is coming out with an initial public offering (IPO) worth Rs 8,430 crore. It has filed the draft red herring prospectus (DRHP) with the markets regulator SEBI. Once the SEBI gives its go-ahead, Oyo will raise the money from institutional investors and the public, followed by the listing on the stock exchanges.

As part of the IPO, Oyo will have Rs 7,000 crore worth of fresh issue. In addition, its existing investors will offload their stakes worth Rs 1,430 crore in the company (called offer for sale).

The largest shareholder of Oyo – SVF India Holdings (Cayman) Limited, which is a subsidiary of SoftBank Vision Fund LP – owns 46.62 per cent in the company. It aims to sell a stake worth Rs 1,328.53 crore during the IPO.

Other shareholders like A1 Holdings Inc, China Lodging Holdings (HK) Limited and Global IVY Ventures LLP intend to sell stakes as well. Interestingly, Oyo’s Founder and Chairman Ritesh Agarwal is not planning to sell his stake, which stands at 8.21 per cent. RA Hospitality Holdings (Cayman), which is owned by Agarwal as well, owns a 24.94 per cent stake in Oyo.

Also read: OYO to file DRHP for $1 bn IPO next week; eyes $10-12 bn valuation

The hospitality start-up has incurred net losses in each year since its start (2012), and the company says its ability to achieve profitability may be delayed. For instance, its (restated) losses for FY21 stood at Rs 3,943.84 crore, which was lower than Rs 13,122.78 crore in FY20.

As per DRHP, Agarwal was not paid any remuneration by Oravel Stays in FY21 but he got a remuneration of Rs 1.62 crore by subsidiary Oyo Singapore. In FY20, Agarwal was paid a remuneration of Rs 0.21 crore.

The DRHP says that Oyo intends to use more than some proceeds from the IPO to prepay or repay certain borrowings taken to fund the organic and inorganic growth initiatives of its subsidiaries. As of July 2021, Oyo had a consolidated debt of Rs 4,890.56 crore.

Oyo operates over 1,57,000 storefronts (hotels and homes) across 35 countries. Its key markets are India, Europe, Malaysia and Indonesia though. Oyo claims to have the second-largest loyalty programme in India with 9.2 million subscribers. The largest is Jet Airways’ InterMiles.

Following the Covid-19 pandemic, Oyo has changed its business model to revenue share where it takes 20-35 per cent commission on gross booking value (net of discounts and loyalty points) from its hotel partners. Unlike in the past, the company does not own any storefronts listed on its platform. Also, 99.9 per cent of its storefronts do not have minimum guarantees contracts or fixed payout commitments -- a model that resulted in major differences between Oyo and its partner hotels.

Also read: OYO files for Rs 8,340 cr IPO; SoftBank to dilute its stake

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