OYO Eyes November IPO Filing, Aims for $7-8 Billion Valuation

OYO, the global travel tech and hospitality company, is reportedly preparing to file its Draft Red Herring Prospectus (DRHP) in November, aiming for an initial public offering (IPO) with a valuation between $7-8 billion. The move signals a renewed push for a public listing after multiple previous attempts were delayed.

The company’s board is expected to review and approve the IPO proposal in the coming weeks. The successful listing would be a significant milestone for OYO and a defining moment for India’s startup ecosystem.

A Closer Look at the IPO and Valuation

Sources familiar with the matter indicate that OYO’s largest shareholder, SoftBank, has been in discussions with investment banks like Axis Capital, Citi, Goldman Sachs, and Jefferies to gauge investor interest. The targeted valuation of $7-8 billion is based on an EBITDA multiple of 25-30 times, a notable metric given the company’s recent focus on profitability.

The company’s journey to this valuation has been a roller coaster. In 2019, OYO was valued at a peak of $10 billion, but this figure was subsequently revised downward. The current target reflects a more confident outlook, driven by improved financial performance and strong tailwinds in the travel and hospitality sector. OYO plans to highlight its latest financial results, including its first-ever full fiscal year of profitability, in the upcoming DRHP.

Driving Factors Behind the Listing

Several key factors are contributing to OYO’s decision to move forward with the IPO:

• Improved Financial Health: The company has recently achieved profitability, a crucial turnaround from years of significant losses. This improved financial health provides a strong foundation for a public offering and is expected to be a major selling point for investors.
• Sectoral Momentum: The hospitality industry is experiencing a post-pandemic boom, with both domestic and international travel demand soaring. This favorable market environment provides a strong backdrop for OYO’s public debut.
• Shareholder Exits: The IPO will provide an avenue for early investors, particularly SoftBank, to partially exit their stake and realize returns on their investments.

Strategic Business Evolution

In preparation for its public market debut, OYO’s parent entity, Oravel Stays, is reportedly considering a new brand identity to unify its expanding portfolio. The company is also exploring the launch of a separate app for its premium and mid-market hotels, catering to a segment that has seen exponential growth in India and its global markets.

OYO’s business model has also evolved, shifting from a lease-heavy approach to a more asset-light franchise model. This strategy reduces operational costs and capital expenditure, which has been key to the company’s path to profitability. The company’s reliance on its proprietary technology, including its AI-based pricing algorithm, also remains a core strength, optimizing revenue for its hotel partners and for OYO itself.