Oyo’s IPO Could Be Delayed as Indian Regulator Asks for Updated Filing

The initial public offering of India-based budget hotel operator and aggregator Oyo may be further pushed back from its intended deadline of a launch within the first quarter this year.

India’s capital markets regulatory body, the Securities and Exchange Board of India (SEBI), has now advised Oravel Stays, the parent company of Oyo, to refile the initial public offering draft papers with updates.

The regulatory body on Tuesday said that it has returned Oyo’s draft red herring prospectus on December 30, asking the company to refile with applicable updates.

While the details of the revision have not been specified, the markets regulator has reportedly sought an update on risk factors, key performance indicators, outstanding litigations, basis for valuation and other additional information from Oyo.

Speaking to Skift in November, a source close to the company had said that Softbank-backed Oyo planned to launch its initial public offering around the first quarter of 2023.

Seeking a valuation of around $12 billion, Oyo had filed preliminary documents in September 2021 planning to raise around $1.16 billion through the initial public offering.

A Fresh Look at Valuations

The Securities and Exchange Board of India is looking closely at valuation of new-age initial public offerings and there is evidence of mis-pricing or irrational exuberance given the post-listing price movement of companies such as One97, Zomato and others, said a broker, who had earlier interacted with the Oyo management while they were talking to investors post their first draft red herring prospectus filing.

“Also, Oyo’s business may have undergone changes since the document was first filed in 2021 and there would be a need to have a fresh look at valuations on a back of a fresh filing,” he said.

In September last year, Oyo’s dipped value stood at around $6.5 billion in the private market after SoftBank Group cut its valuation by more than 20 percent.

In June, Fitch Ratings had also downgraded the rating of Oravel Stays, over profit uncertainty, from B to B-.

Updating its draft red herring prospectus with results for the first half of the 2023 financial year in November, Oyo had reported that its adjusted earnings before interest, taxes, depreciation, and amortization for the second quarter grew eight times from $860,000 in the first quarter to $7 million primarily driven by a 23 percent quarter-on-quarter rise in gross booking value per hotel.

Timeline Dependent on Oyo

It is possible that the Securities and Exchange Board of India may not be satisfied with the clarifications to the addendum to the draft red herring prospectus filed by Oyo last year in September, said a market observer.

The various complaints against Oyo also don’t seem to be working in the company’s favor, according to him.

When asked about how delayed the initial public offering may be, the observer said, “The ball is back in Oyo’s court, whether they choose to serve or not, is up to them and their investors. Only after they refile the draft red herring prospectus will the timelines of SEBI apply.”

Busiest Day of The Year for Oyo

Meanwhile, Oyo reported over 450,000 on New Year’s Eve, which the company said was 35 percent more than last year and is also the highest bookings per hotel per day for India in the last five years.

In a series of tweets last week, Ritesh Agarwal, founder and group CEO of Oyo spoke about the “busiest day of the year” for the travel technology company.

“My team just informed me that over 750 cities have seen a 50 percent jump in bookings compared to last year. Breaking our own records by the minute,” Agarwal mentioned in a tweet.

Oyo witnessed a major uptick in travel and tourism in 2022 and while leisure destinations may have led the global travel recovery curve, in India, business and cultural travel have significantly contributed to the sector, according to the hotel aggregator.