SoftBank cuts valuation of Oyo to $2.7 billion: Report

Masayoshi Son-led SoftBank has cut the internal valuation of Ritesh Agarwal-run Oyo to $2.7 billion from its last reported valuation of nearly $10 billion, TechCrunch reported on Thursday.

The reported valuation cut comes at a time when the hospitality major is eyeing its initial public offering (IPO) in months to come.

The report, citing a source, said that SoftBank is the largest investor in Oyo -- at 45 per cent -- and its estimation "is a strong signal of the startup`s current health".

A company spokesperson termed the report as "inacurate", saying it makes "no rational basis" as the company has actually improved its finances.

"We are confident that the above speculations about valuation markdown is patently incorrect. Valuation is an outcome of business performance. As per our latest audited results, we have clocked Rs 7 crore maiden adj EBITDA profit in the June quarter, at 41 per cent gross profit margin and a 45 per cent increase in gross booking value per hotel per month vs last financial year," the company spokesperson said in a statement.

"There is no rational basis for a markdown," the spokesperson added.

Oyo`s other significant investors include Sequoia India and Lightspeed Venture Partners India.

The hospitality major has filed an addendum to its earlier submitted draft red herring prospectus (DRHP), filed in October 2021 for its IPO, to the Securities and Exchange Board of India (SEBI).

The company is now eyeing early 2023 for its IPO amid volatile global market conditions.

The DRHP addendum also triggered a major controversy in India.

Former Infosys Director T.V. Mohandas Pai slammed Oyo for allegedly misleading investors via `fake accounting` as the hospitality major reported its maiden positive EBITDA during the first quarter of the current fiscal.

Oyo claimed (adjusted) EBITDA-level profitability of Rs 10.6 crore for the June quarter.

Abhishek Gupta, Oyo`s Group Chief Financial Officer (CFO), replied to Pai, saying that the EBITDA is "clearly reported".

"EBITDA is clearly reported & is higher Rs 10.57 cr for Q1FY23 than Adj EBITDA of Rs 7.26 cr. Other Income not included in EBITDA & Adj EBITDA. All numbers are from audited signed financial statements. Global non-GAAP metrics are defined transparently," Gupta had tweeted.

The company said the revenue for FY22 was Rs 4,905 crore, a growth of 18 per cent from Rs 4,157.3 crore reported in FY21.

Oyo managed to halve its losses for FY22 at Rs 1,892.2, from Rs 3,382.5 crore in FY21.