India's Oyo Hotel startup eyes US$9b IPO valuation

Mumbai

OYO Hotels, the once hard-charging Indian startup that struggled during the pandemic, is eyeing a valuation of about US$9 billion in its initial public offering after preliminary conversations with potential investors, said sources. The SoftBank Group-backed startup is expected to get the green light to proceed with the offering this week or next after filing preliminary documents in 2021, said the sources.

The valuation Oyo is targeting would be lower than the US$12 billion initially reported last year and probably lower than the US$10 billion level it hit in 2019. The startup, led by 28-year-old Ritesh Agarwal, has discussed offering a discount of up to 15 per cent on the US$10 billion suggested by bankers in early discussions.

Executives are watching IPO demand as Oyo prepares to build an order book from institutional investors, a source said. The decline in tech stocks in the US may also weigh on valuations.

Such muted expectations reflect Oyo's financial struggles and a more measured appetite for IPOs in India following the disastrous stock market debut of Paytm. The digital payments provider raised a record US$2.4 billion in its November offering, but shares quickly plunged and now trade at about half the IPO price.

Oyo's offering will be among the biggest IPOs since Paytm's. Its preliminary filing said it planned to raise 84.3 billion rupees (S$1.5 billion) through selling new shares and some secondary shares, or those held by existing investors.

Agarwal founded the Gurgaon-headquartered Oyo, formally known as Oravel Stays, in 2013. SoftBank founder Masayoshi Son encouraged Agarwal to rapidly expand beyond India into markets like Japan and the US. The Covid-19 pandemic brought expansion to a sudden halt. The startup has overhauled its business model too to focus on selling software and support services to hotel operators, resorts and home owners, while providing a platform for travellers to book lodging.

Revenue plummeted during the fiscal year ended in March 2021, but Oyo made progress towards profitability. It lost 39.3 billion rupees for the fiscal year, down from 128 billion rupees the year before. BLOOMBERG