OYO In Talks With Family Offices To Raise A Down Round

SUMMARY

The Ritesh Agarwal-led startup is in talks with InCred to raise about $80 Mn to $90 Mn from family offices

A part of the capital will be utilised to pay off the hospitality major’s debt while the remaining chunk will be deployed to accelerate the company’s growth

The latest development comes close on the reports that OYO was mulling raising up to $450 Mn through the sale of dollar bonds

Hospitality major OYO is reportedly in talks to raise a down round at a valuation of $2.3 Bn, down 77% from its peak $10 Bn valuation back in 2019.

As per a report in The Arc, the Ritesh Agarwal-led startup is holding discussions with financial services company InCred to raise about $80 Mn to $90 Mn from family offices. The hospitality giant is reportedly “willing to accept commitments” starting $2 Mn each from InCred’s pool of investors.

Inc42 reached out to the company for a comment on the matter but an OYO spokesperson declined to comment on the matter. A company spokesperson, however, told The Arc, “This information is half-baked and incorrect. We are currently focused on refinancing our outstanding debt, which will help improve our profitability significantly”.

InCred is said to have asked OYO to form a special purpose vehicle (SPV) to enable wealthy individuals and family offices to invest in the company. A part of the capital will be utilised to pay off the IPO-bound company’s debt while the remaining chunk will be deployed to accelerate growth.

InCred arranged a call with founder and CEO Ritesh Agarwal recently where close to 100 investors were present,” a source told The Arc.

What is, however, interesting is that the company’s management reportedly informed the investors during the call that the total size of the round would be $150 Mn and half of it will come from an undisclosed sovereign wealth fund. OYO is said to be exploring a public listing in the next 12 to 24 months.

While there is no clarity on the name of the fund, previous reports have stated that OYO has been in talks with Malaysian sovereign wealth fund, Khazanah Nasional Berhad, since at least the start of this year.

Investors on the call reportedly sought more clarity from Agarwal on how he was planning to settle the $2.2 Bn debt raised from Japan’s Mizuho and Nomura back in 2019. In three years since then, the debt was marked down to a quasi-equity component of $950 Mn in 2022 that will have to be repaid in 10 years. A sum of $383 Mn is due by 2027.

The latest development comes close on the reports that OYO was mulling raising up to $450 Mn through the sale of dollar bonds as part of a refinancing effort led by JP Morgan.

As a result, the company is said to have moved the market regulator Securities and Exchange Board of India (SEBI) to withdraw its IPO papers, with plans to file a fresh draft red herring prospectus post the financing round. The SoftBank-backed startup refiled its DRHP for IPO via confidential route last year to raise up to $400 Mn-$600 Mn from public markets. This was a far cry from the $1.2 Bn IPO it had originally planned in 2021.

Founded in 2012 by Agarwal, OYO offers holiday homes, coworking spaces, budget hotels, corporate stays, and more. The startup has raised more than $3.5 Bn in funding till date and counts SoftBank, Peak XV Partners and Microsoft as investors.

The startup reportedly wrapped up financial year 2023-24 (FY24) with operating revenues to the tune of $700 Mn. Meanwhile, its adjusted EBITDA jumped 3X year-on-year (YoY) to $110 Mn, excluding ESOP costs and interest payments on debt.