Chinese Hotel Firm Rakes in Six-Fold Return as It Sells Minor Stake in Oyo

Chinese hospitality company H World Group – formerly Huazhu – has sold one-fifth of its holding of Indian hospitality company Oyo to United Arab Emirates-based family offices and institutional investors for around $9 million, a source told Skift.

The company’s partial exit translates to a 500 percent gain and values H World’s remaining stake at over $36 million.

The transaction now leaves H World Group with a 0.63 percent stake in Oyo, implying a valuation of around $6.5 billion for Oyo, which is looking to list on the Indian stock exchange.

In a transaction last October, Oyo was also valued at $6.5 billion, indicating no change at a time of heightened scrutiny on startup valuation.

H World’s Oyo Association

The Chinese company that held 0.78 percent in Oyo-parent company Oravel Stays through one of its subsidiaries, has sold 10 million equity shares, which translates to one-fifth of its holding.

While Oyo declined to comment on the matter, sources privy to the matter said there has been an enhanced interest in it since it refiled its draft papers with the Indian stock exchange regulator in March.

However, they declined to disclose the names of those who have bought H World’s stake.

H World Group had acquired a stake in Oyo in 2017 for $10 million at a reported valuation of $850-900 million. This was a top-up to a SoftBank-led funding round of $250 million.

In March, H World Group had sold its remaining 3.7 percent stake in Accor for an undisclosed sum to concentrate on its core activities.

The news came a little more than a month since Accor sold its remaining 3 percent stake in H World for $460 million.

Some Background for Oyo

Recently, ratings agency Moody’s said it expected Oyo to generate around $55 million in earnings before interest, taxes, depreciation, and amortization — a measure of profit — this fiscal year.

The Moody’s forecast was based on a further demand recovery in the hospitality business, a higher number of storefronts on Oyo’s platform, and more cost reductions.

Oyo had earlier planned to value its initial public offering at $1.1 billion, but in March, the company announced that it was reducing the size of the offering to between about $400 and $600 million.

Oyo filed the draft papers confidentially under the new pre-filing route and is waiting for approval from the Securities and Exchange Board of India.

The company plans its IPO around the Indian festival of Diwali, which falls on November 12 this year.

The company recently announced that it plans to double the number of premium hotels, such as Townhouse, Collection O and Capital O, in India in 2023 by adding approximately 1800 high street, upmarket hotels.

The company’s UK business plans to add more than 50 properties to its UK portfolio in 2023 with a focus on cities such as London and Birmingham.

Oyo already has more than 150 hotels across the UK. The company is also planning to add over 100 hotels in the US in 2023.