OYO Slashes IPO Size To $400-$600 Mn, Eyes Listing Around Diwali

SUMMARY

OYO has filed the DRHP with SEBI through confidential pre-filing route

The hospitality major will raise $400 Mn-$600 Mn through a primary issuance to repay its debt

This is a major markdown from the INR 8,430 Cr ($1.2 Bn) OYO was looking to raise previously

Three months after markets regulator Securities and Exchange Board of India (SEBI) directed OYO to refile its draft red herring prospectus (DRHP), the hospitality major has filed the documents through the confidential pre-filing route and with a reduced size.

Sources told Inc42 that the IPO size has been reduced to $400-$600 Mn. The unicorn will raise the funds through issuance of fresh shares to repay its debt.

OYO is now eyeing a public listing around Diwali pursuant to SEBI approval, the sources added.

OYO declined to comment on the matter.

It is pertinent to note that OYO first filed its DRHP in September 2021. At that time, it planned to raise INR 8,430 Cr ($1.2 Bn) through the market listing.

Describing the rationale behind taking the confidential pre-filing route, a person familiar with the development said that the move will give OYO ‘some leeway’ on the timing of the listing and on fine-tuning the issue size based on market conditions.

The confidential pre-filing route provides companies planning to go public more flexibility on issue size during the initial stages and allows them to change the primary issue size by 50% till an updated DRHP is filed with the regulator.

Besides, under the traditional IPO filing method, startups have to go for an IPO within 12 months of the SEBI nod, while the new route allows companies to float an IPO within 18 months of SEBI’s final comments.

As per a report last week, OYO’s current investors are unlikely to sell their shares in the IPO.

A Breather Of Sorts For OYO

Initially, OYO was looking to raise INR 7,000 Cr through fresh issue of shares and INR 1,430 Cr through OFS when it filed its DRHP in September 2021.

Subsequently, the hospitality major received SEBI nod for the IPO in January 2022. However, weak global cues and market volatility resulted in a sharp decline in valuations of listed tech startups, forcing OYO to postpone its public listing.

After postponing its IPO plans, OYO filed an addendum to its DRHP in September 2022. Afterwards in January this year, SEBI asked OYO to refile paper for its IPO citing lack of updated financial disclosures for the September quarter of FY23 in its prospectus, prompting today’s announcement.

However, since the last time, OYO’s situation has considerably improved. It has pared some of its losses, while it claimed to have achieved its first EBITDA positive quarter in Q1 FY23. Earlier this week, CEO Ritesh Agarwal was quoted as saying that OYO is well poised to clinch a revenue of INR 5,700 Cr in FY23, and is targeting an EBITDA of nearly INR 800 Cr in FY24.

The latest development comes at a time when many Indian new-age tech startups, like PharmEasy, Droom, MobiKwik, and boAt, have decided to postpone their IPO plans or withdraw their DRHP amid the global economic slowdown.

Meanwhile, OYO is well placed to leverage its dominant position in the hospitality segment. As per a report, the homegrown hotel booking segment is estimated to surge to a size of $7.6 Bn by the end of 2023.