Oyo, once a high-flying company, is struggling to regain its purple patch. Not only is it planning to cut its IPO size but also trying to manage its financial pressures. Back in 2019, Oyo’s market valuation was $10 billion. Contrarily it is going through a lackluster performance with mounting losses of $30 million. The Covid-19 pandemic was no less than a thunderstorm for the hospitality and tourism sector. None of us are unaware of this fact! Oyo hotels have been postponing its planned IPO in 2022. Reason? Due to a massive market slump that is eventually affecting its valuation. In this article, you will get a thorough disentanglement of Oyo IPO.
Let’s have a brief look at Oyo’s journey so far!
The acronym “OYO” refers to “On Your Own Rooms.” Do you know it is India’s largest hotel network spread over 199 cities? Oravel Stays Limited is doing business as OYO rooms. It operates travel and hospitality software. Through this platform, you can instantly book affordable as well as trusted accommodation. It is an unlisted private company.
Some significant details about Oyo
|Company’s Name||OYO (Oravel Stays Limited)|
|Type of Industrial Segment||Hospitality Sector|
|Headquarters||Gurugram (Haryana, India)|
|Areas Served||Asia, Europe, and the USA|
|Market Valuation (FY 2022)||$6.5 billion (Rs.53,454 crore)|
|Revenue (FY 2022)||$692 million (Rs.5,700 crore)|
|Profit/Loss (FY 2022)||loss of $30 million (Rs.333 crore)|
OYO’s vision is to empower entrepreneurs and small businesses with homes and hotels to increase their earnings. They achieved this by simplifying the operation of the hotel booking system. OYO was not only beneficial for hotel owners but also for common folks.
Funding Rounds, Valuation, & Initial IPO plan
Till now, OYO has raised $4 billion through 19 funding rounds. Softbank is the largest investor in OYO and owns 45% of it. In 2022, the hospitality giant was targeting a valuation of $9 billion. But later, Softbank slashed the valuation of OYO to $3.4 billion. However, the IPO plans in 2022 failed due to multiple reasons like devaluation of the company, negative downfall in the market, etc. Some of the key points of funding rounds and valuation of OYO till now are given below.
|Number of funding rounds||19|
|Total funding amount||$4 billion|
|Total number of investors||30|
|Lead investors||14 (including Qatar Insurance Company, Microsoft, SoftBank Vision Fund, and Hindustan Media Venture)|
|Number of acquisitions||8 (Direct Booker, Damanica, Leisure Group, Quanyu Islands, Innov8 Coworking, Weddingz, AblePlus Solutions Pvt Ltd, Novascotia Boutique Homes)|
|Initial IPO Plan||September 2021 (Failed)|
Management Changes before OYO IPO
Recently, the hospitality giant OYO reshuffled its management staff. The point to ponder here is, the reshuffling has been done just ahead of the forthcoming OYO IPO. It provided additional roles to its staff. It happened before refiling the DRHP with market regulator SEBI for its Initial Public Offering. (Note: DRHP refers to Draft Red Herring Prospectus and SEBI refers to Securities and Exchange Board of India).
The major management changes of OYO are-
|Official’s Name||Current Role||New (Additional) Role|
|Abhinav Sinha||COO (Chief Operating Officer) of OYO||Chief Product & Technology Manager|
|Gautam Swaroop||CEO (Chief Executive Officer) of OYO International||Allied Business at OYO|
|Anuj Tejpal||Chief Business Development Officer||Global Chief Merchant Officer|
|Abhishek Gupta||CFO (Chief Financial Officer)||Work with Company’s large Institutional Investors|
|Shreerang Godbole||Chief Service Officer||Data Science Division & also work with Super OYO initiative|
|Mandar Vaidya||CEO of OYO Europe||The company’s premium hotel asset portfolio includes “5 by OYO” in Jaipur “4 by OYO” in Zirakpur, and “3 by OYO” in Ahmedabad and Vadodara.|
Revaluation of IPO Size
OYO started planning for an IPO back in September 2021. At that time it filed papers for Rs.8430 crore IPO. Thereafter, it proposed to offer shares of Rs.7000 crore with Rs.1430 offer for sale. But that IPO attempt failed drastically. In March 2023, it again filed a fresh IPO document. But now, it is reducing 2/3rd of its shares for the public offering. It will sell only 1/3rd of its shares in the IPO. Eventually, the amount of capital it was expecting to receive through IPO will decline as well.
Reason for pushing IPO despite lower tech valuations
Due to inflation, the valuations of technology companies are falling hard. Seeing the probability of recession in India and overseas, OYO’s current investors are not going to offer their shares in the IPO. OYO will again finalize the valuation for OYO IPO through a book-building process. However, the OYO IPO valuation of this year is going to be way much different than it originally anticipated. Also, the personal debts of the founder are seen as a red flag by the regulators and investors. This factor is also a key reason for the delay of the IPO.
Analyzing the Strengths & Weaknesses of OYO IPO
In case you are seeking to invest in OYO IPO, you should know certain strengths and weaknesses (risks) of the company. The following strengths and risks greatly impact OYO IPO.
|Massive expansion worldwide covering South-East Asia, Europe, and the USA.||Numerous strong competitors are present in this segment.|
|A considerable amount of customers demand OYO hotels||Apart from OYO rooms, other products didn’t perform up to the mark|
|Usage of advanced technology for hotel bookings||Low-profit margins|
|Effective business planning||Too much tussling with hotel owners over revenue shares.|
OYO started as a company specializing in the hospitality sector. But now it is all set to recast itself as a technology company. It is shifting its strategy and focusing on technology instead of relying on heavy assets and capital intensive models that resulted in humongous losses. It claimed that its earnings grew by 23% in the current year as compared to the previous year. Also, it is expecting a 19% rise in revenue in FY 2023 i.e. $625 million.
Let’s see what happens!