Oyo Rooms Officially Files For Rs. 8,400 Crore IPO

It had been reported for a while, and it’s finally happened — Oyo Rooms has officially filed for its IPO.

Oyo Hotels & Homes has filed its draft prospectus with the country’s capital market regulator Securities and Exchange Board of India (Sebi) to raise Rs 8,430 crore ($1.2 billion) through a public issue. Oyo is looking to raise around Rs 7,000 crore ($950 million) through fresh issuance of shares, while the rest of it would be through secondary share sale (offer for sale or OFS), through which existing Oyo investors can sell their stakes. Oyo hasn’t mentioned its expected share pricing in the DRHP, but it was last valued at $9.6 billion after raising around $5 million in strategic investment from Microsoft.

Oyo says it would use the proceeds from the IPO to pay off its borrowings and funding its growth initiatives. Oyo will use around Rs. 2441 crore to finance prepayment or repayment of borrowings made by Oyo’s subsidiaries. Oyo will use an additional Rs 2,900 crore for funding its organic and inorganic growth initiatives. The rest of the IPO proceeds will be for general corporate purposes.

It’s an unusual time for Oyo to go public — the hospitality market had been battered by the coronavirus pandemic, and travel largely hasn’t returned to pre-pandemic levels. There is also the imminent threat of the third wave in India, which could once again put the entire country in lockdown.

But the Indian stock market is booming, and the Sensex had breached the 60,000 mark for the first time just last week. Other startup IPOs have been well received — Zomato’s IPO was priced at Rs. 76, but its stock has nearly doubled since then, and trades at around Rs. 140. And with a host of other startups, including PaytmNykaaMobikwik and others also lined up to go public, Oyo Rooms likely feels that this is the right time for an IPO, even with the spectre of the coronavirus having not yet fully dissipated.

But Oyo was having a rough time even before the pandemic. In January 2020, right before the coronavirus had hit, a bombshell New York Times report had alleged that Oyo had created fake room bookings to impress investors. The very same month, Oyo had fired 2,000 employees in China, which had led to protests outside its offices. In India, income tax officials had conducted a “recovery survey” at its Gurgaon office to determine if it was correctly paying taxes, and some partner hotels had alleged they were having trouble contacting its representatives.

Oyo has appeared more upbeat about its prospects in recent times, and hinted that its business was back to normal. And while Oyo’s valuation had been slashed to as low as $3 billion by Softbank during the pandemic, Microsoft had invested a small sum in Oyo recently at a valuation of $9.6 billion in July, which could lead the company to believe that it has momentum on his side.

It remains to be seen how the stock markets react to Oyo’s stock, but an IPO is an incredible conclusion to Ritesh Agarwal’s story, which began when he founded the company at the age of 19. The last decade has been eventful — Oyo has expanded to countries across several continents, hired some of India’s top executives, fired thousands of workers, seen lawsuits, controversies, and even personal allegations against Agarwal. Agarwal today is just 27, and to have taken a company public at an age when most people are just about beginning their careers will be a entrepreneurial tale for the ages.