Hotel aggregator Oyo has pre-filed a fresh draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) to raise $400-500 million through an initial public offer (IPO), sources said on March 31.
As the confidential pre-filing route gives an option to change the fresh issue size, a source said that the IPO size may be revised within the $400-600 million range. The earlier plan of a secondary sale component in the IPO has been scrapped and the objective of the issue is to repay most of the debt.
Oyo declined to comment on the matter.
Late in 2022, the market regulator returned the DRHP, asking Oyo to refile the prospectus with additional information. Oyo had indicated that the refiling process could take up to two-three months.
The pre-filing route option was allowed by SEBI in November 2022 as part of bringing in progressive and globally popular practices. The option is available in large global markets such as the US, the UK, Canada, etc.
It offers companies more flexibility on issue size during the initial stage, unlike the traditional route where companies have to launch the IPO within 12 months from the SEBI approval, or final observation.
The pre-filing route allows an IPO to be floated within 18 months from the date of SEBI’s final comments.
This route also provides flexibility to change primary issue size by 50 percent till the Updated Draft Red Herring Prospectus stage.
“The market continues to be highly volatile globally and to an extent in India as well," a source close to the company said on the reason for opting the pre-filing route.
The pre-filing route would give Oyo some leeway on the timing of the listing and “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," the source said.
Oyo’s last submission to SEBI, in November 2022, was of its updated results for the first half of financial year 2022-23, claiming that potential investors need to be made aware of the material uptick in its business performance since its initial IPO application in September 2021.
A review of the updated financials showed a bounce back in topline, increase in gross margins and an overall reduction in losses.
It reported its maiden positive Adjusted EBITDA of Rs 63 crore, a 24 percent year-on-year increase in revenue and 69 percent increase in monthly booking value (GBV per month) for its hotels in H1 FY2023.
In an employee townhall on March 27, founder Ritesh Agarwal said, “The company expects to clock Adj. EBITDA of nearly Rs 800 crore in FY2024, that is, the upcoming financial year. We are taking measures to keep a healthy cash runaway and continuing to operate in a cost-effective way."
"We have a current cash balance of approx Rs 2,700 crore and we hope we will end up consuming very little of it for existing operations. Our cash flow has shown improvement and our reliance on external funds has gradually decreased overtime.”
The performance could be attributed to sustained growth in India, Indonesia, the US and UK and relevant optimisation as well as synergies in its European vacation homes business, Agarwal said.
He said Oyo’s adjusted EBITDA for H2, FY2022-23 is expected to rise 3 times to around Rs 185 crore, marking the company’s first financial year of adjusted EBITDA profitability.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
