SoftBank-backed India start-up Oyo revives IPO plans amid travel rebound

Oyo Hotels, the once-high-flying Indian start-up, is relaunching plans for an IPO after cost-cutting and a rebound in travel helped trim losses.

The hotel booking company filed new financial documents on Monday and is now focused on an IPO in early 2023 – assuming the Indian stock market holds up and economic conditions improve, sources said.

Oyo, officially known as Oravel Stays, is working internally towards an IPO in January as executives are encouraged by rising demand, they said.

Oyo had filed preliminary IPO documents in 2021, only to see its listing plan on hold earlier this year after the ongoing pandemic hampered growth and forced the company to shed thousands of jobs. The company released its latest financial data in a supplement to the IPO filing on Monday, with the numbers showing lower losses and a rebound in sales for the year ended March 2022 and the following three months.

The start-up now focuses on four main regions: India, Malaysia, Indonesia and Europe, where it manages holiday homes. It has scaled back operations in markets it previously considered crucial, like the U.S. and China, where headcount is now in the single digits, a source said.

Oyo and founder Ritesh Agarwal are attempting a successful IPO after a series of setbacks in their efforts to transform the hotel and lodging industry. SoftBank Group founder Masayoshi Son was an early and enthusiastic backer, and the Japanese conglomerate owns about 47 percent of the Gurgaon-based startup. Mr Agarwal, 28, owns about a third of it.

The revived listing schedule also underscores how the Indian stock market is bucking the trend of global technology stocks falling. Accelerating inflation, ongoing Covid-19 infections and the war in Ukraine have sent the tech-heavy Nasdaq index down 27 percent this year. Meanwhile, India’s benchmark index, the NSE Nifty 50, is up 1 percent.

Oyo reported a loss of 18.9 billion rupees ($237 million) for the year ended March 2022, nearly halving the previous 12 months. The numbers have been adjusted from previously undisclosed numbers and included in the addendum to the IPO document provided by its bankers.

The annual loss before interest, taxes, depreciation and amortization shrank from 18.7 billion to 4.8 billion rupees. For the three months ended June 2022, revenue on this basis was Rs 105.75 million while net loss was Rs 3.5 billion.

Revenue from contracts with customers for the financial year ending March 2022 rose 21 per cent to Rs 47.8 billion, with travel picking up as the pandemic subsided. Revenue is still well below the Rs.131.7 billion booked for FY2020 before the full impact of the coronavirus took hold.

Oyo submitted its preliminary document, called the Draft Red Herring Prospectus, or DRHP, for a $1.1 billion IPO last September. Twelve months have passed since then without the listing being deleted. Earlier this year, it attempted to submit additional documents and received regulatory approval to move. The startup was most recently valued at $9 billion, researcher CB Insights said.

Oyo was founded in 2013 by Mr Agarwal, then 19, who dropped out of college to travel around the country. The start-up began working with small hotels to standardize everything from bedding to shower fixtures, which it then branded with its bright red and white Oyo logo.

With the backing of high-profile investors such as SoftBank and Lightspeed Venture Partners, the company rapidly expanded into Southeast Asia, China, Europe and the United States as it secured hotel partners with guaranteed-return agreements. At one point, Mr Agarwal was ambitiously aiming for the title of world leader in branded stays.

During the pandemic, Mr Agarwal was forced to overhaul the start-up’s business model. Oyo laid off thousands of employees and stopped offering hotel operators guaranteed returns or capital to renovate their properties. He described the switch as transitioning to an “asset light” model.

Instead of offering minimum guarantees, Oyo now supports hotel and vacation home partners with technology and product services as well as customer support. Hotel owners can register themselves and manage bookings and services in the app.

Updated September 19, 2022 7:13 am