Sebi returns Oyo's draft IPO papers, asks to refile with certain updates

Sources are expecting IPO in October-December quarter of this year

The initial public offering (IPO) of Oravel Stays, parent to hospitality chain Oyo Hotels, may now hit the market by the last quarter of this calendar year, following the direction of the Securities and Exchange Board of India (Sebi) to re-file its draft red herring prospectus (DRHP) with revisions, said sources.

The markets regulator said on its website on Tuesday that it returned the offer document on December 30, 2022 with an advice to re-file with applicable updates and revisions.

“The earlier plan was to launch the IPO between April-July of 2023 but now there might be delays, owing to the process and we can expect the IPO hitting the market by Diwali this year, however subject to market sentiments,” said a person in the know.

The issue size of the company is also likely to be downsized, depending on fresh valuations and their need for cash.

As per the initial filing in September 2021, Oyo Hotels was planning to raise Rs 8,430 crore, comprising a fresh issue of equity shares worth Rs 7,000 crore and an offer for sale (OFS) of up to Rs 1,430 crore.

“The company had filed several addendums to the DRHP in the last year as the cash-burn improved, and litigations and risks went down. Furthermore, they wanted to share their path to profitability to the investors and updates on their Ebitda (earnings before interest, tax, depreciation and amortisation). For all these updates, Sebi has asked the company to refile the offer documents,” said a source.

The market watchdog has asked the company to refile with updated key performance indicators (KPIs), risk factors, parameters for offer pricing, among other material disclosures, said people aware of the matter.

According to Sebi’s website, Oyo Hotels had filed two addendums sharing additional information in September and November last year. The company had reported that its revenue for the 2021-22 financial year (FY22) had surged 18 per cent to Rs 4,905 crores, year-on-year. Moreover, the company almost halved its losses for FY22 at Rs 1,892.2 crore from Rs 3,382.5 crore in FY21.

“This is one of the few cases where Sebi has returned the DRHP with an advice to re-file with updates. The DRHP has neither been withdrawn by the company nor rejected by Sebi. Therefore, the DRHP is still alive, and the company cannot raise fresh funds unless disclosures in relation to pre-IPO placements are made in the DRHP,” said Anil Choudhary, partner, Finsec Law Advisors.

It is noteworthy that in the last board meeting held on December 20, Sebi chairperson Madhabi Puri Buch had said that the regulator has been sending back the filings to merchant bankers which are repeating the same errors.