[YS Exclusive] Softbank-backed OYO files for $1.2Bn IPO; 83% fresh issue and 17% offer for sale

Hospitality startup OYO, founded by Ritesh Agarwal in 2013, said it is considering issuing shares worth $193 million in a pre-IPO fund raise.

Aparajita Saxena

Rashi Varshney

[YS Exclusive] Softbank-backed OYO files for $1.2Bn IPO; 83% fresh issue and 17% offer for sale

Friday October 01, 2021,

4 min Read

Hospitality unicorn Oyo joined a host of tech startups making their way to capital markets on Friday after it filed its draft red herring prospectus (DRHP) for an initial public offering (IPO) to raise around $1.16 billion (Rs 8,430 crore) with market regulator-Securities and Exchange Board of India (SEBI).

YourStory had exclusively reported details around OYO IPO earlier this week that no major investors and the founder Ritesh Agarwal will be diluting any stakes in the company in this IPO, which is expected to launch by end of this year or in January.

According to the document seen by YourStory, OYO’s initial public offering consists of equity shares of face value of Re 1 each of Oravel Stays Limited aggregated up to Rs 8,430 cr ($1.16 billion).

As per the document, the offer comprises a fresh issuance up to Rs 7,000 crore and an offer for sale aggregating up to Rs 1,430 crore.

The IPO will consist of 83 percent fresh issue and 17 percent offer for sale. The document also read that the company and its stakeholders may, in consultation with lead managers, consider a further issue of equity shares for cash consideration aggregating up to Rs 140 crore.

“The Pre-IPO placement, if undertaken, will be at a price to be decided by the company and its stakeholders in consultation with the Lead Managers and the Pre-IPO placement will be undertaken prior to filing of the Red Herring Prospectus with the ROC,” read the document.

The document adds that over the past year, OYO has implemented a number of measures as a part of its COVID-19 response strategy, including accelerated development and adoption of technology and products to reduce operating costs, and repositioning its offerings.

The company also streamlined strategic and shared services functions, such as revenue management, supply, human resources, legal and finance, from country teams to regional teams to streamline processes, create more efficiencies and reduce costs.

OYO’s Adjusted Gross Profit Margin improved from 9.7 percent in FY2020 to 33.2 percent in FY2021 along with an annual 79 percent reduction in EBITDA losses in FY2021.

The startup aims to raise about $942 million through the sale of new shares, and the rest via a secondary offering. The IPO is expected to hit the market in January 2022.


OYO will use the proceeds from its IPO to pay off its existing obligations, as well as fund its growth via mergers and acquisitions, the startup said in its draft red herring prospectus (DRHP) with the Ministry of Corporate Affairs.

Founder Ritesh Agarwal will not dilute his 34 percent stake in the company. Market experts see OYO being valued at over $12 billion in the IPO. SoftBank owns over 45 percent of the Gurugram-headquartered startup. Other investors include Lightspeed Venture, Airbnb, Grab, Microsoft, and Sequoia — to name a few.

OYO's IPO announcement comes against the backdrop of a number of Indian tech startups seeking to list on the stock exchanges. Fintech startups Paytm and MobiKwik, and online beauty products retailer Nykaa have also outlined plans to debut on the exchanges in the next 12 months.

India's benchmark index, BSE Sensex, last week hit a record high of 60,412.32, while the Nifty 50 soared to 17,947.65, indicating investors, despite the upset caused by COVID-19, remain bullish about the economy and the equity market.

Zomato's blockbuster debut, after an oversubscribed placement, has increased investors' appetite for landmark Indian startups listing on the stock exchanges. Retail investors, especially, have been actively investing in IPOs over the last year, and formed a major chunk of those who applied for Zomato's IPO.

The RBI, taking note of the mercurial IPO market, said recently that "the year 2021 could well turn out to be the year of IPOs for the country".

Investors are even going so far as shrugging off any downsides to the startup's bottom line if they haven't shown profits.

OYO, itself, had been struggling ever since pandemic-induced lockdowns zapped travel and booking of its hotels. But, with some nimble footwork from Ritesh, the startup has managed to keep its head above the ground.

It has been ramping up its suite of technology products for the hospitality industry with consumer and partner applications such as OYO, OYO OS, Co-OYO, as well as several applications led by AI/ML and analytics, such as a dynamic pricing app called Tariff Manager; OTA (online travel agents) performance management, Discover OYO; personalised recommendations, Yo! Chatbot, among others.

Edited by Saheli Sen Gupta