In a strategic move ahead of its planned IPO, hospitality giant OYO, led by Ritesh Agarwal, is reportedly in early discussions with Malaysia’s sovereign wealth fund, Khazanah Nasional Berhad, to raise approximately $400 Mn. Sources close to the matter have indicated that OYO is eyeing a valuation of $6 Bn in this potential funding round, making it the first such fundraising for the company in two years.
The talks are currently in their early stages, with Avendus Capital advising on the deal. If the discussions materialize into a deal, it would mark a significant financial move for OYO, allowing it to fortify its position and support its expansion plans.
Utilizing Fresh Capital for Expansion and Debt Repayment: According to insiders, OYO intends to utilize the fresh capital infusion for strategic expansion initiatives and to address existing debt obligations. The startup had previously taken a term loan debt of $660 Mn in July 2021. The latest funding round could play a pivotal role in not only supporting OYO’s growth trajectory but also in servicing its debt.
Debt Repayment Plans and Financial Health: Late in the previous year, OYO announced plans to repurchase 30% of its outstanding term loan B (TLB), amounting to INR 1,620 Cr ($195 Mn). The debt repayment, scheduled for June 2026, is expected to be fully funded with cash on the balance sheet and from the cash collateral account. This move aligns with OYO’s efforts to strengthen its financial position.
OYO has been vocal about its financial progress, especially as COVID-related restrictions eased and tourism witnessed a resurgence. Founder and CEO Ritesh Agarwal revealed in September that the company was on track to report its first-ever profitable quarter in Q2 FY23-24, projecting a profit of INR 16 Cr in July-September 2023.
IPO and Financial Outlook: OYO, which last secured primary funding from Microsoft in 2021 at a valuation exceeding $9 Bn, has seen a decrease in its net loss, reporting INR 1,286.5 Cr in FY23, down 34% from INR 1,941.5 Cr in the previous fiscal year. As part of its IPO preparations, OYO reduced its IPO size to $400-$600 Mn in 2023 from the initial $1.2 Bn and filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) through the confidential pre-filing route.
Looking Forward: As OYO navigates discussions for fresh funding with Khazanah, the outcome could significantly influence its financial landscape, providing the necessary momentum for its IPO plans and fortifying its market position.
