Ritesh Agarwal-led travel tech start-up OYO is in active discussions with multiple private equity firms for raising a large private round, even while it awaits the Indian markets regulator's approval for its initial public offering (IPO). Sources suggest that the company is in talks to raise about half a billion dollars with the expectation of a valuation of over $6 billion. As per sources with direct knowledge, of the $500 million, about $300 million could be primary or fresh issuance and $200 million could be via secondary sale.

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Sources said that the $300 million primary issuance would be used for growth capital and partially to prepay the outstanding $600 million debt. OYO’s current cash balance (treasury corpus) is said to be approximately $280 million. Reports suggest that the hotel aggregator is also in discussions with lenders to refinance debt at better terms after showing profitability.

In response to a CNBC-TV18 query, an OYO spokesperson said, "Since our consistent increase in profits, we regularly get approached for cheaper financing options but the board hasn't approved anything, including prepaying some portion."

An industry expert said that with the company reaching profitability and IPO plans delayed, it makes sense to consider other fundraising options.

Interest in the COVID-embattled start-up picked up after it started reporting a positive EBIDTA. It reported FY23 adjusted EBIDTA of Rs 277 crore. The company posted a surprise maiden profit after tax (PAT) of Rs 16 crore in the recent quarter (Q2FY24).

The main point of contention is the valuation of the company, a source suggested, “founder, Ritesh Agarwal may be pushing for a valuation of $7 billion at 45 to 50x multiple on the $150 million one year forward (FY25) projected PAT valuation.”

A few existing investors in OYO may be also considering participating in the fundraising round but the company is also keen on bulge bracket PE players to invest for which an investment bank has been hired.

As per the filed DRHP with the SEBI, the shareholding details show founder Ritesh Agarwal with 8.21% stake, RA Hospitality owns 24.94% while Softbank is the single largest shareholder with 46.62% stake in OYO. Investors like Lightspeed, Peak IV (Ex Sequoia), and Hero Group have a minority stake in the company.

Recently, global rating agency Moody’s (Moody’s Investors Service) shared that it expects OYO to remain EBITDA positive for FY24. Ratings agency Fitch also upgraded its rating on OYO and said that they expect OYO to deliver positive EBITDA and CFO (Cash Flow from Operating Activities) in FY24, led by a greater reduction in operating costs than expected, ongoing demand recovery in the travel and tourism industry and stable gross margins.

The company in its filing said that the OYO app is the fourth most downloaded travel app globally (as of July 2023) and the most downloaded travel app in key Asian markets. Its popular loyalty program OYO Wizard retains its position as the largest loyalty programme among leading travel brands with over 13.5 million members, as of June 2023.

Also Read:OYO talking to Apollo for $660 million refinance as IPO delayed

(Edited by : Sangam Singh)

First Published:Oct 9, 2023 2:26 PM IST