Fitch Upgrades Oyo Rating Citing Positive Cash Flow

We are thrilled to announce a new event coming next year, the Skift India Summit in Delhi-NCR, happening March 20-21, 2024. This follows the successful launch of our India newsletter, Skift India Report, the Skift India Travel Podcast, with more features to come. 

In commemoration of the 20th anniversary of the 2004 Lake Hamana Flower Expo, which attracted over 5 million visitors, Lake Hamana Flower Expo 2024 is set to take place next spring with tickets now on sale. Set against the stunning backdrop of Lake Hamana, the colourful event will take place for almost two months at two venues: Hamamatsu Flower Park from March 23rd to June 16th and Hamanako Garden Park from April 6th to June 2nd. Visitors will be able to enjoy stunning gardens such as the ‘Cherry Blossom and Tulip Garden’, one of the most beautiful in the world, as well as those designed by world-famous garden designers including Kazuyuki Ishihara, who to date has won 12 gold medals at the Chelsea Flower Show and has been praised by the late Queen Elizabeth as ‘the gardening magician’. Additionally, new gardens are being exclusively designed for the expo alongside cutting-edge attractions including interactive digital installations and Japan’s largest nighttime projection mapping.

Most popular tourist destinations try to increase the number of visitors every year. But that’s not the case on the glamorous Spanish island of Mallorca. Faced with the prospect of losing their paradise to the growing swell of tourism, local activists have taken an innovative approach to keep its azure waters less crowded—fake warning signs posted on some of Mallorca’s most popular beaches. Seemingly ordinary to passersby, these signs bear disturbing messages in English such as “dangerous jellyfish” or “falling rocks.” While tourists are led to believe they face physical dangers, the messages actually make with bold statements such as: “the problem isn’t a rockfall, it’s mass tourism,” or the satirical note that the beach is “open—except for foreigners and jellyfish.”

More than London at the moment, Bristol seems to encapsulate the contradictions, energy and frustrations of the British nation. This city, which straddles the River Avon, is small (the population was just under 500,000 in 2019) but it punches well above its weight when it comes to politics and art. When a group of activists threw the statue of Edward Colston in Bristol harbour in June 2020, it focussed attention on Britain’s historic role in the slave trade. (Colston, who had endowed schools, almshouses and hospitals in Bristol had, in the 17th century, been instrumental in the transportation of at least 84,000 enslaved people during his involvement with the Royal African Company). Nowhere in Britain voted more fervently to remain in Europe (62 per cent versus 38 per cent voting to leave).

Hotel occupancy and room rates have bounced back to pre-pandemic numbers, primarily due to the soaring demand for the G20 Summitto be held in New Delhi on September 9 to 10. 

Oyo, in preparation for its upcoming IPO in 2023, is doing a major reorg of its organizational structure and cost base. It has announced it is letting go of 600 employees out of a total of about 3700, mostly in its product and tech teams. From the company:

Australia’s Qantas Airways Ltd raised its first-half pre-tax profit outlook on Wednesday on strong travel demand, with limits on international capacity helping boost domestic tourism, sending its shares to more than a two-year high.

With fewer business travelers in the skies, Lufthansa is now allowing passengers to bid for an upgraded seat during a live auction.

India will invest around $12 billion over the next two years in airports, aircraft and recruitment to meet the booming demand for air travel. The country aims to increase the number of airports from the present 148 to 220 by 2025, for which private builders will contribute roughly $9 billion, with the balance coming from the government-run Airports Authority of India. It entails new terminal construction, greenfield projects, and refurbishment of existing buildings, including old military airfields from the colonial era, as per a Bloomberg report. “We need to put in place the civil aviation infrastructure and capabilities that by 2047 would be able to support a $20 trillion economy within India,” said the country’s civil aviation minister Jyotiraditya Scindia at the ongoing CAPA India Aviation Summit in New Delhi. Scindia said passenger capacity at India’s six major airports is expected to grow to 420 million in four years from 192 million today, and Indian carriers’ fleet will grow to 2,000 aircraft in five years from 700. Additionally, India has eased leasing rules for airlines to lease more aircraft to address aircraft shortages as travel rebounds from the pandemic. He also highlighted how India had tweaked its airplane leasing program to enable airlines to add more aircraft to meet passenger demand, including more “wet leasing,” or renting of planes with crew, for domestic and international routes. Tata Group-owned Air India last month announced a record order for 470 jets and is due to take another 25 leased aircraft.

Reports suggest that India-based budget hotel operator and aggregator Oyo will be reducing its Initial Public Offering (IPO) size by about two-thirds. The company is likely to file a fresh document for its IPO as soon as this week, according to a Bloomberg report. The company had initially filed to go public in October 2021. In December, India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), had advised Oravel Stays, the parent company of Oyo, to refile the draft prospectus, updating all the relevant sections such as risk factors, key performing indicators, outstanding litigations and basis for offer. Oyo’s last submission to SEBI was the updated financial results of the first half of financial year 2022-23. Updating its draft red herring prospectus with results for the first half of the 2023 financial year in November, Oyo had reported that its adjusted earnings before interest, taxes, depreciation, and amortization for the second quarter grew eight times from $860,000 in the first quarter to $7 million primarily driven by a 23 percent quarter-on-quarter rise in gross booking value per hotel. However, speaking at a town hall on Monday, Oyo Founder and Group CEO Ritesh Agarwal told employees that Oyo expects its revenue in the financial year 2023 to be more than $692.5 million, up 19 percent from 2022’s $581 million. Agarwal attributed the company’s better financials to sustained growth in India, Indonesia, the U.S., and the UK, and relevant optimization and synergies in its European vacation homes business. He outlined that Oyo’s key focus areas this year would be on profit after tax along with consistent momentum in earnings before interest, taxes, depreciation and amortization, achieving cash flow positive in financial year 2024, cost efficiency and improving contribution margins, and making storefront additions. 

Travel exchange company EbixCash — the Indian arm of insurance software company Ebix — has been granted regulatory approval for its long-awaited initial public offering (IPO). The IPO is expected to raise between $732 million to $975 million, making it one of the largest IPOs in the financial services sector in India. The company has already filed a draft red herring prospectus, but the IPO is still subject to the necessary approvals, market conditions, and other factors. In the run-up to the anticipated IPO, EbixCash had filed its prospectus with the Indian stock market regulator Securities and Exchange Board of India (SEBI) on March 10, 2022 after CEO Robin Raina declared on the company’s quarterly earnings call that EbixCash would file its prospectus “imminently.” Ebix declared its intent to raise $787 million via the IPO, while retaining a significant majority stake in EbixCash. While EbixCash operates in several segments — payment solutions, travel, financial technologies, business processing outsourcing services and startup initiatives — it receives over 80 percent of its revenue from the payments services business. Under this business, the company offers domestic remittance, forex, international remittance and prepaid cards/gift cards. It largely generates revenue based on commissions and transaction fees from providing these services. 

Leading operators in the Indian tours and travel sector are set to report 6-7 percent growth in operating profits in fiscal 2023, after having reported losses for the past two fiscals due to pandemic-induced travel restrictions, according to Crisil Ratings. Revenue is likely to recover 90 percent of pre-pandemic levels, buoyed by strong recovery in both corporate and leisure travel segments in India and abroad. Crisil Ratings expects operating margins to sustain at these levels next fiscal, due to implementation of cost optimization and automation initiatives undertaken by travel operators commencing from the pandemic period, even as revenues are expected to pass pre-pandemic levels next fiscal. This marks a significant turnaround from operating losses of 25.8 percent and 2.7 percent in fiscals 2021 and 2022, respectively. “Rising business travel, along with increasing return-to-office and preference for face-to face meetings besides increasing consumer preference for short breaks will push revenue past pre-pandemic levels in fiscal 2024. Interestingly, preference for short holidays is seeing momentum, especially within India and Asian destinations,” said Poonam Upadhyay, Director, CRISIL Ratings. The improvement in operating performance, together with healthy liquidity and net debt free balance sheets, will help strengthen credit profiles of the players, the report said.