Softbank-backed hospitality firm Oyo closed a debt financing round of $ 660 million from global institutional investors on July 16 with an aim to retire some of its existing debts and pump up its operations and product technology. Oyo’s chief financial officer Abhishek Gupta said that the company’s audit committee and board are expecting a ‘public market event’ by the end of this year without putting a time or date on the rollout. This strongly indicates that the board of the company has asked the hospitality firm to start getting ready to go public even as the pandemic continues to disrupt the travel space.
The company has begun taking steps towards the IPO including share buyback plans of founder Ritesh Agarwal and streamlining its business into two units, the Indian hotel business, and the international and technology business. According to a report by The Economic Times, Agarwal is in the process of buying back shares from the company’s early backers Sequoia Capital and Lightspeed Venture Partners, to boost his ownership. Currently, Agarwal owns 9.43%, Sequoia 10.24%, and Lightspeed 13.4%, according to Paper VC.
For IPOs in India, 2021 has been a strong year with 22 companies debuting so far. A flush of money from foreign funds and mom-and-pop investors putting their money saved during the lockdown to work have driven the surge. Indian companies raised ₹27,417 crores through initial public offerings (IPOs) this year, the highest in at least a decade compared to six months of previous years, driven by an abundance of liquidity and investor euphoria.
Talking about the impact of the COVID-19 pandemic on Oyo’s business, Gupta said, “The COVID waves are directly correlated to our business recovery. When we were in the January-February-March of this year in India between wave one and wave two, our business was looking at a very fast recovery, almost 50-60 percent of pre-COVID levels in India. We were actually profitable for those three-four months in India and then came quarter two when we went back into the red because bookings dropped and the revenues dropped. As of the last two weeks, we have seen a surge of business coming back.”
On Zomato’s recent IPO rollout, he said, “These are very positive developments. All these IPOs usher a new era to the Indian consumer internet ecosystem. This is very positive for the entire ecosystem.” The share sale is estimated to value Oyo, the country’s second most valuable startup after Paytm, at up to $18 billion, according to a few non-Oyo investors.
Commenting on their way forward, Abhishek conveyed that it has been a tough period, but at the same time the company is focused on transforming into a tech-first product-led company as presently 85% of the consumer complaints are handled by chatbots and about 80% of partner support systems are led by automated response systems. This has also altered their cost structures, margin profiles, and gross margins. And even though the market recovery is underway, the company claims to reach a group-level profitability target soon.
Categories: Venture Capital