OYO’s Private Market Valuation Tanks To $6.5 Bn After Reports Of SoftBank Markdown

Hospitality major OYO’s valuation has reportedly plummeted to around $6.5 Bn in the private market after SoftBank cut the value of its stake in the startup.

According to reports, SoftBank slashed the valuation of its stake in the IPO (initial public offering)-bound startup by 20% to $2.7 Bn at the end of the first quarter (Q1) of the financial year 2022-23 (FY23). 

Sources told news agency PTI that around 12.3 Lakh shares of OYO were sold in the private market in the week ended September 30, as compared to 1.6 Lakh shares in the week before. People familiar with the development said that the selloff was triggered amid reports of markdown in the valuation of OYO by Masayoshi Son-led tech investor.

The month of September proved to be a rollercoaster ride for OYO. In the beginning, the startup filed an addendum to its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI), reporting its first EBITDA positive quarter in Q1 FY23. The hospitality giant also said in the filing then that it slashed loss by 51% in FY22 to INR 1,939.8 Cr.

As a result, the startup’s share price rose to INR 94 in the private market, bringing cheer to its investors. However, as the reports of OYO markdown emerged in the subsequent days, the price of its shares tanked nearly 13% to INR 81 per share, said a source.

“Last year, transactions (of OYO shares) in private markets happened at around $8 Bn range but in the recent past transactions are happening up to $6.5 Bn valuation,” PTI quoted Analah Capital CEO and founder Vaishali Dhankani as saying. 

This is a steep reduction from last year when OYO was pegged at $9.6 Bn after Microsoft invested $5 Mn in the hotel chain.

The IPO Woes

It is pertinent to note that SEBI granted an in-principle nod to OYO for its $1.2-Bn IPO earlier this year. However, the hospitality player repeatedly delayed listing on bourses amid adverse market conditions and tightening monetary policies across the globe. 

In June, Inc42 reported that OYO would go public around Diwali and was mulling to reduce its offer size by $800 Mn. But the current market scenario appears to have further weakened OYO’s position. 

OYO is not the only startup marred by the ongoing market volatility. Other names such as MobiKwik, boAt, Snapdeal, Droom, Pine Labs and PharmEasy also deferred their IPO plans this year. 

To add to that, funding raised by Indian startups is also on a decline, dropping to 2020 levels at the end of September this year. An Inc42 analysis found that Indian startups raised $3 Bn in Q2 FY23, recording a 50% drop compared to the preceding quarter and 82% lower than Q2 FY22.