Oyo Pauses IPO – Plans to Refile After Refinancing

22.05.2024 - 20:21 / skift.com / Peden Doma Bhutia / Ritesh Agarwal

Indian hospitality company Oyo has withdrawn its application for an IPO, which it had filed in March 2023, according to a notification Wednesday by the Securities and Exchange Board of India (SEBI).

A source familiar with Oyo’s plans said the company is close to completing a refinancing and it expects to pursue an IPO after it’s done.

“Since the decision for refinancing is at an advanced stage, it doesn’t make sense to continue pursuing IPO approval with the current financials. Oyo would need to withdraw its current application,” the source said.

The company is close on a $450 million refinancing at an interest rate of 9% to 10% – significantly lower than the current effective rate of 14%.

The move would save Oyo $8 million to 10 million in interest expenses in the first year, with savings increasing to $15 million to $17 million annually.

Given its net profit of $12 million, the savings from refinancing will be a significant change.

JP Morgan is reportedly leading the refinancing effort.

Oyo had previously denied it was withdrawing its IPO. A source familiar with the process told Skift that an IPO was still on the table, but that it was also considering other ways to raise money.

In an employee town hall on Wednesday, Ritesh Agarwal, founder and CEO of Oyo, confirmed the company has been approached by private investors and may do a small equity round at a $3-4 billion valuation, or at INR 38-45 ($0.46-0.54) per share to further reduce its debt.

Agarwal also mentioned that the company may consider further buybacks.

During the town hall, Agarwal noted that Oyo posted an adjusted EBITDA of $107 million for fiscal 2024, up from $33 million in fiscal 2023, marking its eighth consecutive EBITDA-positive quarter. Oyo also achieved its first net profitable year.

This is the second time Oyo has withdrawn its draft IPO papers.

The company initially filed for an IPO in 2021, aiming to raise approximately $1.16 billion with a valuation around $12 billion. However, in September 2022, SoftBank Group, Oyo’s largest investor, reduced the company’s valuation to around $6.5 billion. Last year, Oyo announced a reduction in its IPO size to between $400 million and $600 million.

Major investors in Oyo include Agarwal, SoftBank, and RA Hospitality, alongside Lightspeed and Peak XV Partners.

“My view is that, at this point of time, we don’t need access to capital from either the public markets or the private markets,” Agarwal had said during the Skift India Summit. “Currently, our focus is just delivering good earnings results, and so on.”