OYO may raise equity from private investors at valuation of up to $4 billion: Ritesh Agarwal

Private investors have approached travel tech platform OYO and it may raise equity at a valuation of up to $4 billion, Founder Ritesh Agarwal told employees in a townhall on Wednesday, sources said.

The IPO-bound firm, backed by Softbank, had its maiden net profitable year, posting a profit after tax (PAT) of Rs 99.6 crore ($12 million) in the 2023-24 financial year.

It also reported an adjusted EBITDA of Rs 888 crore ($107 million) for the full fiscal year, up from Rs 274 crore ($33 million) in FY23, sources said, citing a presentation shared in the townhall.

Oravel Stays Ltd, the operator of the travel-tech company OYO, will refile its initial public offering (IPO) documents with the Securities and Exchange Board of India (Sebi) after the refinancing of its $450 million Term Loan B (TLB) at a lower interest rate, PTI reported last week."OYO has also been approached by friendly investors and may do a small equity round at a $3-4 bn valuation, or at Rs 38-45 per share to further reduce its debt," Agarwal informed employees in the townhall.

In FY24, OYO added about 5,000 hotels and 6,000 homes globally.Gross booking value (GBV) per storefront per month for hotels stood around Rs 3.32 lakh ($4,000).The travel tech platform's gross margins improved in FY24, reaching Rs 2,508 crore ($302 million) up from Rs 2,350 crore ($283 million) in FY23.Operating costs also improved, decreasing from 19 per cent of GBV in FY23 to 14 per cent of GBV in FY24, sources said.Agarwal shared, "This profitability was driven by improving operational performance, stable gross margins, cost efficiencies, and a reduction in interest costs following a part prepayment of $195 million in debt through a buyback process in Q3 FY24.

"For FY25, we hope to grow our revenues and GBV as well, while continuing the profit growth trajectory." OYO had recently concluded a debt buyback of $195 mn (Rs 1,620 crore). 

The buyback process involved the repurchase of 30 per cent of its outstanding Term Loan B due June 2026.Agarwal said the company may consider further buybacks from the cash flow it is generating.The refinancing will reduce interest rate from 14 per cent to 10 per cent, leading to annual savings of Rs 124-141 crore, and will extend the repayment date to 2029.