OYO Reschedules IPO in India Towards the End of 2023

After a delay, startup OYO budget hotel chain reportedly submitted new documents for an initial public offering or IPO in India. According to source Shift, local Indian media, OYO reduced the target of fresh funds being sought between $ 400 million-$ 600 million, a sharp decrease from the initial plan of $ 1 billion.

Oravel Stays, parent of OYO, has resubmitted the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (Sebi). It is planned that the IPO will be held around November 2023 after Sebi gives his approval.

Previously, the IPO bid revealed that in 2021, OYO aims to raise 84,3 billion Rupees ($1 billion). OYO's valuation crossed to $10 billion in 2019, but fell to $2,7 billion last year.

Pre-filing route (pre-filing) will provide OYO with flexibility in terms of timing and size of the IPO. Usually under the traditional route, the company has to carry out an IPO within 12 months of Sebi approval. While in the pre-filing route, the IPO can be filed within 18 months from the date of Sebi's final response.

This route also provides the flexibility to change the size of the primary issue by 50 percent up to the Updated Draft Red Herring Prospectus (UDRHP) stage.

The targeted amount of fresh funds of $400 million-$600 million will be the main issuance (new shares issued by the company to the public), which will be used to pay off most of the company's debt, according to a Skift source.

OYO's latest filing with Sebi in November 2022 is its latest financial results for the first half of the 2022-2023 financial year, which shows a significant improvement in the company's performance since its initial IPO filing in September 2021. Overall topline, there was a continued increase in gross margins, and a reduction in overall losses.

OYO founder Ritesh Agarwal said the company is targeting adjusted EBITDA of nearly ₹800 crore ($98 million) by 2024. To this end, the company will take steps to maintain healthy cash flow and continue operating by saving a lot of expenses.

"We have a current cash balance of approximately ₹2.700 crore ($330 million) and we expect to ultimately be able to use very little cash funds for existing operations. Our cash flow has shown improvement and our dependence on external funds has gradually decreased over time ," Agarwal said deeply town hall recently.

He attributed the improved performance to OYO's business in India, Indonesia, the United States and the UK as well as relevant optimization in the holiday home business in Europe.

Throughout the pandemic, OYO withdrew from a number of markets outside India, cutting staff to survive. The company is also moving away from capital- and physical-asset-intensive business models, shifting its focus to building technology as a service.

OYO Indonesia

The company recently announced its plans to double the number of premium hotels in India by 2023 by adding around 1.800 premium hotels. OYO's focus on premium hotels begins in the last quarter of 2022 with the addition of more than 400 new premium hotels between October and December.

A number of accommodation brands for the mid-premium segment, namely Townhouse Oak, Townhouse, Collection O, and Capital O, are spread across more than 35 countries, including Indonesia. The company also launched an accelerator program for first-generation hoteliers with more than five operational hotels on its platform.

In Indonesia alone, segment corporate users contributes the largest business contribution at OYO. In 2022, OYO explained that there would be an increase in orders in the corporate segment in Indonesia by 237% to 253 corporations from the previous year which was only 75 corporations.

These clients come from the financial, technology, startup, as well as retail and logistics sectors located in Jakarta, Tangerang, Surabaya, Bekasi and Medan. Mainly contributed from the financial sector which is the largest contributor to OYO Indonesia.

Since being present in Indonesia since 2018, OYO has 2.500 properties available in 180 cities, including Jakarta, Bandung, Medan, Palembang, Semarang, Magelang and Yogyakarta. It is claimed that its business growth has increased 15 times with more than 12 million interested customers.

Based on the highest booking trends, Bandung, Bali, Yogyakarta, Malang and Lampung are the holiday destination cities throughout 2022. Meanwhile, Jakarta, Tangerang, Surabaya, Bekasi and Medan are the cities with the highest business visits.