IPO-Bound OYO Seeks $400 Mn Funding From Malaysia’s Sovereign Fund Khazanah At $6 Bn Valuation

IPO-bound hospitality chain OYO, operated by Oravel Stays Pvt Ltd, is in talks with Malaysian sovereign wealth fund Khazanah Nasional Berhad to raise close to $400 Mn in a funding round.

The company is looking for the fresh fundraise at a valuation of $6 Bn, sources close to the matter told Inc42.

If the deal materialises, this would be the first funding of Ritesh Agarwal-led OYO in two years.  

People aware of the matter, requesting anonymity, said that the discussions are at a preliminary stage. Avendus Capital is advising the deal. 

Queries sent to OYO didn’t elicit any response till the time of filing the story. 

Bloomberg, which was the first to report on the development quoting sources said that the startup will utilise the fresh capital for expansion and to repay the debt. It is pertinent to note that the startup had taken a $660 Mn term loan debt in July, 2021. 

Late last year, OYO concluded payments of INR 1,620 Cr ($195 Mn) to repurchase 30% of its outstanding TLB. While the repayment of the debt is scheduled for June 2026, the exercise was  fully funded with cash on the balance sheet and from the cash collateral account.

It must be noted that OYO, which last raised a primary round from Microsoft in 2021, had done so at a north of $9 Bn valuation. 

The fresh development comes close on the heels of OYO elevating its deputy chief financial officer Rakesh Kumar to the position of chief financial officer to drive its finance and operational growth.

The startup for some time now has been claiming that it has improved its financial health as the COVID restriction eased and tourism began to gain pace. In September, OYO was on track to report its first ever profitable quarter in Q2 of the financial year 2023-24 (FY24), according to its founder and CEO Ritesh Agarwal.

In an internal mail sent to the leadership team of the startup, Agarwal claimed OYO will mark its “maiden profitable quarter” with a projected profit of INR 16 Cr in July-September 2023. 

The startup reported a 34% decrease in its net loss to INR 1,286.5 Cr in FY23 from INR 1,941.5 Cr, as expenses declined marginally despite business growth. 

In 2023, OYO reduced its IPO size to $400-$600 Mn from $1.2 Bn earlier and filed its DRHP with the Securities and Exchange Board of India (SEBI) through the confidential pre-filing route.