SoftBank-Backed Hotel Chain Oyo To File For $1.2B IPO
Another unicorn startup backed by SoftBank Vision Fund is about to go public.
Oyo Hotels plans to file for an initial public offering next week in Mumbai, the financial capital of Oyo's home country of India, Reuters reports. The company is targeting between $1B and $1.2B in fundraising to come from the IPO, which will include both the issuance of new common stock and sales of stock from existing shareholders.
SoftBank Vision Fund owns 46% of Oyo after pumping billions into the company to fuel a rapid expansion in India and markets like China and the U.S., but in its expansion, Oyo vastly outspent the amount of revenue coming in. Even before the coronavirus pandemic, Oyo had been slowing its expansion and cutting costs. Once the bulk of travel shut down due to the coronavirus, the cuts were even deeper, Reuters reports.
By July of this year, Oyo founder and CEO Ritesh Agarwal claimed that business was on its way to returning to pre-pandemic levels and beyond in its core market of India, Reuters reports. Also over the summer, Oyo raised $660M in new debt to pay off a previous loan, with the new financing coming with an option to convert it to equity, TechCrunch reported.
Around that same time, Microsoft invested $5M in Oyo in a deal that included a commitment from the hotel company to exclusively use Microsoft's cloud computing service. Even as money started coming back in, Oyo's cost-cutting measures had brought the company's monthly burn rate down to $5M, Agarwal claimed.
With a past that seemed to resemble once-fellow darling of SoftBank Vision Fund WeWork but a slew of positive indicators more recently, Oyo looks set to test the waters of public investment. Kotak Mahindra Capital, JPMorgan and Citi are serving as Oyo's banking advisers through the process, Reuters reports.