Oyo pre-files DRHP with Sebi, cuts issue size to $400-600 million

Oravel Stays, the parent firm of hospitality major OYO, refiled Draft Red Herring Prospectus (DRHP) with Securities and Exchange Board of India (Sebi) on Friday, reducing the issue size for the company’s public listing to almost half in tune with the changed realities.

The DRHP was filed under the confidential pre-filing route with a reduced issue size of $400-600 million, all of which will be raised through a primary issuance, in a bid to repay the firm’s debt, Business Standard has learnt.

The company expects an issue timing of November this year, following approvals from Sebi.

It is the second attempt at an IPO by the hotel aggregator as Sebi had flagged several concerns on its earlier bid in late 2021.

Under the confidential route, which was introduced by SEBI in November 2022, the filing is available only to the regulator at the initial stage.

Unlike the traditional route, where companies must launch the IPO within 12 months from Sebi approval or final observation, an IPO can be floated within 18 months from the date of SEBI’s final comments using the confidential method.

This method also provides flexibility to change primary issue size by up to 50 per cent till the updated DRHP stage.

The Softbank-backed hospitality firm has reduced the size of its initial public offering (IPO) amid volatile market conditions and a reduction in capital requirements.

“The market continues to be highly volatile globally and, to an extent, in India as well. Filing through the pre-filing route will give OYO some leeway on the timing of the listing, as well as on fine-tuning the issue size, basis the market conditions, to between $400 to 600 million, all of which will now be a primary issuance, to repay most of its debt. Though for now an issue timing of around Diwali is likely once SEBI approves,” a source close to the company told Business Standard.

Queries sent to OYO did not elicit an immediate response.

Tata Play (formerly Tata Sky) was the first company in India to pre-file confidential DRHP with Sebi in November 2022. The option has been available in countries like the US, the UK, Canada etc. 

The Gurugram-based firm had filed preliminary papers for a Rs 8,430-crore ($1.2 billion) IPO back in September of 2021, looking for a valuation of $11-12 billion. OYO had, however, postponed its public listing due to a market slump.

After filing its papers yet again over a year later, the company was asked to refile its DRHP by Sebi. The market regulator had, in January this year, asked the firm to refile its public listing application with updates and revisions -- including sections, such as risk factors, outstanding litigation and Basis for Offer.

Its founder and CEO Ritesh Agarwal, in an internal town hall on Monday, told employees that OYO’s revenue for FY23 is expected to be over Rs 5,700 crore, up 19 per cent from Rs 4,780 crore in the previous financial year.

The firm expects to report adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) of around Rs 800 crore in FY24.

“The company is taking measures to keep healthy cash runaway and is continuing to operate in a cost-effective way. We have a current cash balance of Rs 2,700 crore and we hope we will end up consuming very little of it for existing operations,” a source claimed Agarwal as saying during the meeting.

Agarwal added that this performance can be attributed to sustained growth in India, Indonesia, the US and the UK and relevant optimisation as well as synergies in its European vacation homes business.

The firm had also -- through an addendum to its DRHP -- reported its maiden positive adjusted Ebitda of Rs 63 crore, a 24 per cent year-on-year increase in revenue, and a 69 per cent increase in monthly booking value (GBV per month) for its hotels in the first six months of FY2023.

However, the company is still not profitable at the net level.

For the second half of the year, Agarwal -- during the townhall -- shared that OYO’s adjusted Ebitda is expected to rise three-fold to Rs 185 crore, marking the company’s first financial year of adjusted Ebitda profitability.

Revenue for the period, the CEO revealed, is expected to be over Rs 2,800 crore, a year-on-year increase of 15 percent compared to the same period in FY2022.