Hospitality giant OYO has come to the IPO table twice and left without a bite. While the company will refile the draft prospectus for its much-anticipated initial public offering soon, the focus has turned to OYO’s efforts to refinance debt ahead of the public listing.

According to sources, the OYO IPO is likely to be pushed back by six months to a year, especially as the company awaits the terms of the refinancing deal for the $660 Mn Term Loan B availed by founder and CEO Ritesh Agarwal to buy back shares from investors in 2019.

The IPO postponement is largely because of the material implications on OYO’s financials from this refinancing of this loan, which was already restructured in 2022.

OYO is said to be actively looking for a pre-IPO placement round cumulatively raising $200 Mn – $250 Mn from various fund offices, HNIs albeit at a much lower valuation than its last fundraise, when it commanded a valuation of close to $10 Bn. Top sources privy to the ongoing funding developments within the company said that the company has raked in $200 Mn from a clutch of investors and the announcement is likely to happen next week.

While Inc42 could not verify the deal structure, it is said to involve a secondary share sale as the company’s largest investor SoftBank looks to divest its stake as valuation drops.

OYO’s Turnaround Towards Profits

The refinancing of around $660 Mn (approx INR 5,300 Cr) of the pending Term Loan B amount will help the company save INR 124 Cr – INR 141 Cr per annum and will have material implications on the FY25 financial performance.

“The refinancing will reduce interest rate from 14% to 10%, lead to considerable annual savings and extend the repayment date to 2029. OYO’s operating costs improved to 14% of top line revenue in FY24, from 19% in FY23. Costs were cut across the board, which also led to layoffs,” as per our sources close to the company management.

This is in line with company’s claims of turning around the INR 1,000 Cr net loss in FY23 to INR 100 Cr net profit in FY24. OYO is said to have significantly cut down its employee costs by laying off nearly 600 employees even as lease related costs shot up.

CEO Agarwal further said that the company had logged eight consecutive quarters of profitability in FY23 and FY24, and had cash reserves of INR 1,000 Cr. While OYO is yet to file its audited financial statements for FY24, the company seems to have turned things around in a major way.

Yes, the debt restructuring is a challenge that is yet to be overcome, but from a business model and revenue perspective, the turnaround is evident and nothing short of a remarkable feat for OYO, where there have been questions for years about profitability.

So what really worked out for OYO in FY24?

Sharp Focus On Spiritual Tourism

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