OYO Races To IPO As Founder Ritesh Agarwal’s Debt Deadline Nears: Report

OYO Hotels is reportedly expediting its initial public offering (IPO) plans as founder Ritesh Agarwal faces pressure from creditors to clear a looming debt repayment.

According to a Bloomberg report, citing sources, if the company doesn’t list by October, its lenders, including Mizuho Financial Group, want Agarwal to cough up the $383 Mn he owes from a massive loan package. They might grant him an extension until 2027, but only if the IPO happens this year.

Agarwal borrowed $2.2 Bn in 2019 to increase his stake in the company and gain more strategic control. The multibillion-dollar loan package was restructured in 2022, and the OYO chief has yet to clear the first installment.

Amid all this, Agarwal has been infusing capital into the company. In January, his Redsprig Innovation Partners infused INR 550 Cr (about $65 Mn) into the company.  

This was the second investment by Agarwal after Agarwal’s Singapore-based fund, Patient Capital last year in August, led OYO’S $175 Mn funding round.

This comes at a time when OYO is reportedly targeting a valuation of up to $5 Bn for its public listing. 

This follows multiple delays in its IPO attempts in 2021 and 2023 due to financial restructuring and market conditions, including the pandemic. Last year, the company also eyed a raise of $450 Mn through a sale of dollar bonds to refinance its Term Loan B.

Founded in 2012 by Agarwal, OYO offers holiday homes, casino hotels, coworking spaces, budget hotels, corporate stays, and more. The startup has raised about $4.5 Bn in funding to date and counts the likes of SoftBank Group and Microsoft among its backers.

Ritesh holds around 32% of the company’s stake while the largest investor SoftBank owns more than 40%. 

On the financial front, the company profit after tax (PAT) jumped nearly 6X to INR 166 Cr in the third quarter ended December (Q3 FY25) from INR 25 Cr in the year-ago period. On similar lines, its revenue also increased 31% to INR 1,695 Cr in the quarter under consideration from INR 1,296 Cr in the year-ago period. 

The company turned profitable in the financial year 2023-24 (FY24), reporting a profit of INR 229.5 Cr during the year as against a net loss of INR 1,286.5 Cr in the previous financial year.

The company is also in an expansion spree. It has recently stabilised operations and expanded its global footprint, including acquiring Motel 6 in the US. OYO is also looking to bolster its presence in Europe and the US, where the company earns higher revenue due to larger ticket sizes.

In terms of business operations in India, the company is looking to tap into the premium segments from its current base of budgeted hotels. The company in April 2024 partnered with SoftBank to launch a luxury hotel chain called ‘SUNDAY’, targeting top-tier cities. It also expanded its Palette chain of premium hotels and resorts.