OYO Rushes to go Public as the Debt Deadline Approaches

OYO, a travel tech platform, is speeding up its plans for an IPO as it approaches a significant deadline for year-end debt payments. A media agency reported that if the business doesn't go public by October, creditors, notably Mizuho Financial Group Inc., are putting pressure on founder Ritesh Agarwal to pay back a $383 million loan that was a part of a bigger financing package. According to the story, which cited sources, lenders want to know more about Agarwal's financial situation and might postpone the payback deadline until 2027—but only if OYO goes forward with listing this year. With a guarantee from SoftBank CEO Masayoshi Son, the OYO founder borrowed $2.2 billion in 2019 to expand his ownership of the company and fortify his strategic control over the business. According to the article, Agarwal has not yet paid back the first tranche of the loan, which was restructured in 2022.

The Much Awaited IPO

Although OYO had long contemplated an IPO, their intentions were thwarted by the COVID-19 pandemic. According to the sources, the business has now started talking to bankers about a possible listing and is looking for a valuation of up to $5 billion. With a holding of more than 40%, SoftBank continues to be OYO's largest stakeholder, while Agarwal, whose prior IPO attempts failed, owns more than 30%. When OYO's IPO preparations are finalised, they will consider the company's "strong net profits" for the fiscal year ending March 2024 and an "expected strong year" through March 2025, according to a statement from Agarwal's family office. The family office refuted claims about reorganisation and funding arrangements as "completely incorrect" and called them rumours or speculation. Additionally, it denied the rumoured valuation, claiming that it is lower than recent secondary trades that they are aware of and does not reflect reality.

What Lead to the Financial Crunch?

Founded in 2013, the travel tech business with its headquarters in Gurugram gained the support of SoftBank, who promoted aggressive expansion into areas such as the US and Japan, which ultimately resulted in significant failures. Due to its dependence on low-cost hotels for budget-conscious clients, OYO was especially susceptible to the COVID-19 outbreak, which had a negative effect on its operations. The company's difficulties, which range from legal challenges to losses brought on by overly ambitious overseas development, are indicative of India's startup boom, which was fuelled by venture financing but stalled as investors turned their attention to profitability.

The Recovery Mode

OYO has steadily recovered after the pandemic, and as sales increased, it reported a slight profit for the fiscal year that ended in March 2024. Through his Singapore-based investment company, Patient Capital, Agarwal contributed over $95 million to the business at the end of 2023. In the second quarter of FY25, OYO declared a net profit of INR 158 crore. For the next two quarters of FY25, the business was able to report profits. OYO reported revenue of Rs 5,541.6 crore and a net profit of INR 229.6 crore for FY24, according to research platform Tracxn.

Recent strategic initiatives of the company include the premiumization of its portfolio in India, the acquisition of Checkmyguest, a rental home company located in Paris, and G6 Hospitality, a significant hotel chain based in the United States. Moody's, a global rating agency, kept its outlook unchanged and raised OYO's rating from B3 to B2. In FY25–26, OYO's first full year of profits consolidation with its recently acquired businesses, it projects that its EBITDA will reach $200 million.