India: SoftBank-backed lodging startup OYO is considering revising its planned initial public offering [IPO] by either reducing its expected valuation by up to a half or even abandoning outright, according to a Bloomberg report.
According to people familiar with the matter speaking to Bloomberg, OYO may halve its originally expected $12 billion valuation, although these rumours were shot down by a company spokesperson. The initial target valuation was later revised down to $9 billion in January following preliminary conversations with potential investors.
OYO’s valuation previously dropped to as low as $8 billion at the height of the pandemic, although a period of consolidation restructuring, layoffs and an upsized $660 million loan from global institutional investors in July enabled the business to stabilise by paying off its debts and strengthening its balance sheet.
Founded in 2013, the startup expanded aggressively into markets across the world, including the United States, Europe and Japan. In 2019, it launched its vacation rental business – OYO Vacation Homes – upon the acquisition of Amsterdam-based firm @Leisure Group, although its most recent CEO, Raj Kamal, quietly stepped down last April to be replaced by new OYO Europe CEO Dr Mandar Vaidya.
However, the pandemic and ensuing lockdowns brought much of OYO’s business to a standstill, which resulted in widespread furloughs and layoffs in several of the chain’s core growth markets.
The rumoured moves are reportedly being considered due to investor reticence to commit to IPOs at a time of extraordinary market turmoil, prompted by a number of underwhelming recent public market debuts in the tech space and the ongoing crisis in Ukraine.
Having initially targeted an IPO in 2022, OYO is yet to receive approval from India’s stock market regulator to proceed with its market debut, despite filing its preliminary documents as far back as September. The startup suggested that it had continued to receive interest from investors in the interim period as bookings rebounded and EBITDA losses slowed post-lockdown, but doubts still remain over what path it will take next.
Meanwhile, SoftBank, which is OYO’s largest backer, is believed to be holding off on providing funding for a number of the startups it owns that are weighing up going public, due to diminishing valuations in the e-commerce and SaaS [software-as-a-service] segments.
Changing its IPO terms considerably would require OYO to submit a fresh draft red herring prospectus [DRHP] to raise money from the public and sell shares to prospective investors.
Meanwhile, OYO has announced a rejig of some of its most senior management positions.
Rohit Kapoor has been promoted from CEO, India and Southeast Asia, to the company’s head of marketing; global chief business officer Ankit Tandon will take on an additional role as CEO of Southeast Asia and the Middle East region; and OYO Hotels & Homes CEO Ankit Gupta will step up to the role of CEO, India – all of which will report to the group’s founder and CEO, Ritesh Agarwal.