OYO files IPO to raise $1.2 billion

·4-min read
Representative image
Representative image

New Delhi [India], October 1 (ANI): Global travel technology company, OYO (Oravel Stays Limited) has filed its draft red herring prospectus (DRHP) for its initial public offering (IPO) of Rs 8,430 crores ($1.2bn) with the Securities and Exchange Board of India (SEBI).

Founded in 2012, OYO is a leading new-age technology platform empowering the large yet highly fragmented global hospitality ecosystem. OYO has more than 1.57 lakh storefronts across more than 35 countries that benefit from its platform. On the consumer side, the OYO App has been rated as the most downloaded accommodation app in Asia and the third largest in the world in 2020 as per Sensor Tower.

While OYO has a global footprint, its core growth markets comprise India, Indonesia, Malaysia and Europe. These are the most mature markets in terms of scale and unit economics. OYO's share of the total addressable market in its Core Growth Markets is less than one per cent creating significant opportunities for it to grow its footprint. As per the RedSheer report as of December 2019, the company's total addressable market opportunity consisted of 54 million short-stay storefronts. Around 88 per cent of global hotel storefronts are in the unorganised sector, thus creating significant opportunities for OYO. The scale of OYO's business drives a self-reinforcing flywheel underpinned by strong local network effects and operating leverage. The virtuous cycle created by this flywheel effect enhances OYO's platform stickiness and unit economics for both OYO and its patrons at an ever-increasing scale.

OYO's initial public offering consists of equity shares of the face value of Re 1 each of Oravel Stays Limited aggregated up to Rs 8,430 crores. 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 the filing of the Red Herring Prospectus with the ROC.

Over the past year, the company implemented a number of measures as a part of its COVID-19 response strategy, including accelerated development and adoption of technology and products to reduce operating costs, and repositioning its offerings. The company also streamlined strategic and shared services functions, such as revenue management, supply, human resources, legal and finance, from country teams to regional teams to streamline processes, create more efficiencies and reduce costs. As a result of various initiatives that the company took, its Adjusted Gross Profit Margin improved from 9.7 per cent in Fiscal 2020 to 33.2 per cent in Fiscal 2021 along with approximately 79 per cent reduction in EBITDA losses from FY20 to FY21 despite the pandemic.

The company has an asset-light business model and a lean cost structure. As of March 31, 2021, 99.9 per cent of the company's storefronts did not have contracts with minimum guarantees or fixed payout commitments from the company, with any investments, capital expenditure, storefront employee costs borne largely by Patrons. This enables the company to be capital-efficient and scale its business with minimal marginal costs.

OYO is able to drive the highest share of Direct-to-Consumer (D2C) channel-led demand compared to other leading traditional hotel chains in India and quite high globally as of March 2021. As per Sensor Tower, OYO was the 3rd most downloaded travel app globally in 2020. With over 9.2 million subscribers just in India, OYO Wizard is the largest loyalty program among online hotel or food brands in India.

Investors including Ritesh Agarwal, Lightspeed Venture Partners, Sequoia Capital, Star Virtue Investment Limited (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 Global Co-ordinators and Book Running Lead Managers to the offer are Kotak Mahindra Capital Company Limited, J.P. Morgan India Private Limited and Citigroup Global Markets India Private Limited. The Book Running Lead Managers to the offer are ICICI Securities Limited, Nomura Financial Advisory and Securities (India) Private Limited, JM Financial Limited and Deutsche Equities India Private Limited. (ANI)

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