Oyo Hotels is reportedly trying to accelerate plans for its maiden public offering as the deadline for debt repayment approaches. Media reports said creditors including the Mizuho Financial Group Inc insisted that founder Ritesh Agarwal clear off the dues for his borrowing worth $383 million if the start-up fails to have an initial public offering (IPO) by October.
Citing sources in the know, Bloomberg reported that lenders want Agarwal to have transparent liquidity and will possibly allow the founder to delay the repayment until 2027 only if Oyo goes public this year.
Notably, the borrowing of $383 million is part of a mutlibillion dollar loan package. Agarwal borrowed $2.2 billion in 2019 with a guarantee from backer SoftBank Group Corp head Masayoshi Son to up his stake in Oyo and gain more strategic control over the company. The loan was restructured in 2022 and Agarwal yet remains to pay the first tranche, the report noted.
Oyo’s IPO Plans
Oyo has been flirting with the idea of a debut in the stock market for years now, however, the pandemic wiped out the stellar growth of the company. Now, the start-up is engaged in discussions with bankers for an IPO valuing the firm at $5 billion, the report noted citing sources.
While Agarwal owns more than 30 per cent stake in the company, SoftBank controls a stake of over 40 per cent in the hospitality start-up. Quoting Agarwal’s family office on the company’s IPO plans, the report said, “A lot of the information regarding the financing arrangement and the so-called restructuring is completely incorrect and just speculation or rumor-mongering. The speculated valuation is also separated from reality and lower than the secondary transactions that we are aware of.”
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Oyo’s Journey
Oyo was founded in 2013 by Agarwal after dropping out of college. Set up as the Indian reply to Airbnb Inc, the founder soon managed to secure the backing of Son who mentored the young entrepreneur and encouraged him to rapidly expand in markets such as the US and Japan. However, this ended up in disaster for the Indian company.
Further, the Covid-19 pandemic significantly harmed the business. Oyo has managed to make a gradual recovery as the world reopened post the pandemic and also reported a small for the 2023-24 fiscal year as sales increased.
