The CEO and founder of Oyo Hotels, Ritesh Agarwal.
Oyo Hotels and Homes the parent company of hospitality firm Oyo has filed its draft documents to raise $1.2 billion (Rs 8,430 crore) via an initial public offering (IPO) on the Indian Stock Exchanges.
As reported by Moneycontrol, first founder Ritesh Agarwal will not be offloading any stake in the IPO. He owns around 34 percent stake in Oyo.
The company has proposed to use the net proceeds from the fresh issue towards funding prepayment or repayment, in part, of some borrowings availed by certain subsidiaries. It will also use the fund for organic and inorganic growth initiatives besides using the funds for general corporate purposes.
Besides Agarwal, Lightspeed Venture Partners, Sequoia Capital, Star Virtue Investment (Didi), Greenoaks Capital, AirBnB, HT Media and Microsoft are not diluting their shareholding.
The offer for sale comprises aggregate shares from a small part of SVF India (Softbank), A1 Holdings Inc. (Grab), China Lodging, and Global IVY Ventures LLP.
The IPO is likely to happen in January 2022. It consists 83 percent of fresh issue worth Rs 7,000 crore and 17 percent offer for sale (OFS) worth Rs 1,430 crore.
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 1,400 million ($193 million).
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 Registrat of Companies (RoC).
Oyo joins the league of internet companies who have filed for their IPO in the last few months including Paytm, MobiKwik and Nykaa. While online food ordering firm Zomato, on the other hand, already launched a very successful IPO in July.
The development happens soon after Oyo announced a strategic investment from global IT firm Microsoft.
Moneycontrol had reported about this investment in July.
The company which was last valued at $9 billion is targeting a valuation of around $12-14 billion through this IPO.
The global co-ordinators and book running lead managers to the offer are Kotak Mahindra Capital Company, J.P. Morgan India and Citigroup Global Markets India.
The book running lead managers to the offer are ICICI Securities, Nomura Financial Advisory and Securities (India), JM Financial and Deutsche Equities India.
In July, Moneycontrol first reported that Oyo was aspiring for an IPO by the end of 2021.
Recovering from the COVID-19 pandemic, Oyo completely changed its model to a revenue share one, as compared to the earlier, where it would pay its hotel partners a minimum guarantee.
Following the deal with Microsoft, Oyo is working on technologies to develop smart room experiences for travellers such as customised in-room experiences.
The company has also launched a self-sign up service which would allow hotel owners to go live on the platform in 30 minutes. The move is expected to shore up the number of hotels on the platform which saw a massive decline because of the pandemic.
The pandemic has brought about massive shifts in consumer behaviour while booking travel, including preferences for platforms that enable social distancing, local travel, flexibility, faster booking and improved customer experiences. Such changes have accelerated the way small and medium hotel businesses operate, leading to higher technology adoption, which will further shape the future of hospitality.
Catering to this requirement, the company is focussing heavily on technology to the extent that it enhanced the remuneration of its technology team during peak pandemic.
Last year, Moneycontrol reported that the company had offered its technology team increments and promotions besides full variable for the period of July 2019-June 2020.
In August it also announced plans to hire over 300 technology professionals including software development, engineering, product managers, designers, and data scientists across entry-level to senior leadership roles.
However even as all of this happens, Oyo continues to be embroiled in multiple legal issues.
Earlier this week, Moneycontrol reported that old rival Zo Rooms which has been fighting a legal battle with Oyo for at least three years has filed an appeal in the Delhi High Court (HC) seeking protection of its rights against the company. The court is expected to hear this appeal on October 7.
Earlier this year, Oyo was also embroiled into an insolvency proceeding following a case submitted by a Gurgaon-based hotelier which was accepted by NCLT in March.
It also appointed advocate Keyur Jagdishbhai Shah as the interim resolution professional (IRP), besides asking other creditors of the company to submit their claims as well, in keeping with the insolvency code.
Multiple hotels filed their claims against the company and according to sources, the aggregated claimed amount was close to Rs 160 crore.
It took four months for Oyo to get a breather when NCLAT, the higher the tribunal gave a ruling in favour of Oyo disallowing
the intervention of these hoteliers.