OYO Eyes $200 Mn Funding To Power Its US Expansion Strategy

Just a few days after snapping up Motel 6 and Studio 6 brands’ parent G6 Hospitality, Oravel Stays Ltd is reportedly in discussions for a fresh funding at a larger valuation to boost its inorganic strategy.

For the uninitiated, Oravel Stays’ G6 Hospitality deal, which it had bought from Blackstone Real Estate for $525 Mn (around INR 4382.72 Cr) in an all-cash transaction, was a part of its expansion spree into the US market.

It is pertinent to note that OYO has been expanding its US operations since its launch in the region in 2019. The company now operates over 320 hotels across 35 states. In 2023, OYO added nearly 100 hotels to its US portfolio and plans to add another 250 by 2024.

As per Business Standard, hospitality major OYO’s parent Oravel Stays has kicked off talks with overseas institutional investors and private Indian investors to raise $200 Mn (around INR 1,681 Cr) at an estimated valuation of $4.5- $5 Bn.

In August, OYO secured INR 1,457 Cr (around $175 Mn) in a down round led by Ritesh Agarwal floated Singapore-based entity Patient Capital, along with J&A Partners and ASK Financial Holdings. 

Back then, Patient Capital invested INR 830 Cr, while J&A Partners INR 120 Cr and ASK INR 14 Cr.

Inc42 has reached out to OYO for comments on the development. The story will be updated based on the response.

Additionally, the SoftBank-backed company is also looking to refinance $450 Mn of its outstanding debt, seeking lower interest rates from 14% to 10-10.5% and extending the loan maturity by three years to FY29.

As a precautionary measure, it is also adding a $350 Mn drawable bridge facility to provide interim funding until the equity raise takes place.

“The $350 Mn is a contingency plan and may not be drawn,” a source was quoted by BS as saying. 

Founded in 2012 by Ritesh Agarwal, OYO is a hospitality service company that aims to provide  easy-to-book and affordable accommodation to customers around the world. The company claims to offer over 40 integrated products and solutions in more than 35 countries including India, Europe, and Southeast Asia.

This comes at the heart of OYO looking to go public as soon as next year, after shelving its plans twice. The company plans to refile its draft red herring prospectus (DRHP) with SEBI after completing the ongoing refinancing of its $660 Mn Term Loan B.

The company turned profitable in FY24 as it managed to trim its expenses by cutting employee costs and growing its top line. The unicorn posted a net profit of INR 229.5 Cr in FY24 as against a net loss of INR 1,286.5 Cr in the previous financial year.

Going ahead, OYO is looking to expand its premium inventory as well as its international base. 

Besides this, OYO-owned Innov8 has forayed into the office management space mirroring the business models of the likes of publicly-listed Awfis and IPO-bound Smartworks.

Apart from this, OYO is also undergoing a major overhaul in its top leadership, promoting five executives across technology, product, strategy, operations and distribution verticals.