MUMBAI: India’s Oyo Hotels, founded by Ritesh Agarwal in 2013, is accelerating its plans for an initial public offering (IPO) as it confronts a critical deadline for debt repayment.
The urgency stems from a $383 million obligation to creditors, including Mizuho Financial Group Inc., which demands clarity regarding Agarwal’s liquidity. If Oyo does not successfully list by October, lenders may require immediate repayment of the loan, a part of a larger multibillion-dollar financing package.
Agarwal’s financial journey has been tumultuous. In 2019, he borrowed $2.2 billion, backed by SoftBank’s Masayoshi Son, to enhance his control over Oyo. However, the pandemic severely impacted the hospitality sector, stalling Oyo’s growth and complicating its financial situation.
The loan was restructured in 2022, yet Agarwal has yet to meet the first repayment deadline. The stakes are high; creditors have indicated a willingness to extend the repayment deadline to 2027, contingent upon a successful IPO this year.
Valuing the firm
Oyo’s aspirations for a stock market debut have been long-standing, hindered by the adverse effects of COVID-19 on its business model, which predominantly serves price-sensitive customers.
Despite these challenges, the company is reportedly in discussions with investment bankers to value the firm at approximately $5 billion, a significant recovery from its previous setbacks. SoftBank remains the largest shareholder, holding over 40 per cent, while Agarwal retains more than 30 per cent.
The recovery of Oyo’s financial health is evidenced by its recent profitability, with reports indicating a nearly sixfold increase in profit for the third quarter of the fiscal year ending March 2024. Agarwal’s family office has asserted that any IPO plans will be informed by the company’s strong performance and anticipated growth in the upcoming fiscal year.
Despite the optimism, speculation surrounding Oyo’s financial restructuring and valuation persists, with Agarwal’s representatives dismissing many of these claims as unfounded. The road ahead for Oyo is fraught with challenges, reflective of the broader trends in India’s venture capital landscape, where the focus has shifted from aggressive expansion to sustainable profitability.
