Oyo, the Indian hospitality company, recently withdrew its draft red herring prospectus for an IPO, according to a notification by the Securities and Exchange Board of India. However, sources claim that this move does not indicate that Oyo is abandoning its plans to go public. The company is in the process of completing a refinancing, which is expected to lead to significant savings, and it plans to pursue an IPO after this refinancing is completed.
The refinancing that Oyo is close to finalizing is valued at $450 million, with an interest rate of 9% to 10%, significantly lower than the current rate of 14%. This refinancing is expected to save Oyo between $8 million to $17 million annually, a substantial amount compared to its net profit of $12 million. JP Morgan is leading the refinance effort, and the savings from this process are seen as a significant change for the company.
In a recent employee town hall, Oyo’s founder and CEO, Ritesh Agarwal, confirmed that the company may consider a small equity round with private investors at a valuation of $3-4 billion or at $0.46 to $0.54 per share to reduce its debt further. Agarwal also mentioned the possibility of further buybacks and announced the company’s impressive financial performance, with an adjusted EBITDA of $107 million for fiscal 2024 and its first net profitable year.
This is not the first time Oyo has withdrawn its draft IPO papers. The company faced a similar situation in 2021 when it initially filed for an IPO with a valuation of $12 billion but later saw its valuation reduced to $6.5 billion. Oyo’s major investors include Agarwal, SoftBank, RA Hospitality, Lightspeed, and Peak XV Partners. Despite the withdrawals and valuation uncertainties, Oyo’s focus is currently on delivering good earnings results rather than raising capital from public or private markets.
Overall, Oyo’s recent withdrawal of its IPO application does not mean a halt to its plans to go public. The company is in the process of refinancing, which is expected to lead to significant savings in interest expenses. Oyo’s founder has confirmed that the company may consider alternative funding options with private investors and further buybacks to reduce debt. Despite setbacks and valuation adjustments in the past, Oyo remains focused on delivering strong financial results and achieving profitability.
