Oravel Stays, the parent firm of Softbank-backed hospitality decacorn Oyo, has pre-filed yet another draft red herring prospectus (DRHP) with market regulator SEBI (Securities and Exchange Board of India). Taking the confidential pre-filing route for an IPO, the 10-year-old firm is aiming to launch its initial public offering (IPO) around Diwali this year, according to several media reports.
The hospitality major aims to raise $400-600 million through its IPO, which indicates a fall in the issue size (of more than half) for the company’s listing in the public markets. By pre-filing with SEBI, the Oyo parent can keep the details of the filing confidential, and it can change the amount of freshly issued shares in the proposal by up to 50% till an updated DRHP is filed. This route also allows Oyo to float the IPO within 18 months from the date of the final comments of SEBI.
The reduced issue size consists entirely of freshly issued shares, and Oyo will utilize all the proceeds to repay most of its massive debt.
While Oyo declined to comment on the matter, this is the latest instance of the firm filing a DRHP with SEBI in recent years. The first time was in September 2021, when it aimed to raise over $1 billion (₹8,430 crores, to be precise). In December 2022, SEBI asked Oyo to update its DRHP after the company submitted its updated financial results for the first half of the financial year 2022-23.
“The company expects to clock adjusted EBITDA of nearly ₹800 crores in FY2024, that is, the upcoming financial year. We are taking measures to keep a healthy cash runaway and continue to operate cost-effectively. We have a current cash balance of approximately ₹2,700 crores and we hope we will end up consuming very little of it for existing operations. Our cash flow has shown improvement and our reliance on external funds has gradually decreased over time,” founder Ritesh Agarwal spoke in an employee town hall on Monday.
He added that this performance can be attributed to sustained growth in India, Indonesia, the US, and the UK and relevant optimization as well as synergies in its European vacation homes business. Despite all this, Oyo is yet to be profitable at the net level.
