News Update

OYO turns EBITDA positive in Q1 FY23; files addendum to DRHP with SEBI

• ByStartupStory     |    September 19, 2022

First EBITDA positive quarter of IPO-bound hospitality tech major OYO was reported where the adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) are of INR 7.26 Cr in Q1 FY23. OYO witnessed its EBITDA margins grow up to +0.5% in Q1 FY23 from -9% in FY22.

An addendum was filed by the hospitality tech major firm to its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for its initial public offer (IPO).

The company faced INR 1,939.8 Cr in losses in FY22, down 51% as compared to INR 3,944.8 Cr in FY21 and down 85% as compared to INR 13,123.5 Cr in FY20. The narrowing of losses has prompted OYO to file fresh documents with SEBI.

After three months of Fitch Ratings downgraded OYO parent Oravel Stays’ credit rating from ‘B’ to ‘B Minus’ came the development, it got downgraded largely due to profitability concerns. “OYO will likely achieve meaningful EBITDA profit only in the year ending March 2024 (FY24), relative to our previous expectations of FY23,” Fitch had said in June.

What seems to drive the development is primarily OYO, where it is managing to reduce its costs drastically in various departments, putting across signs of optimisation.

In FY22, the hospitality tech major notched up INR 690.2 Cr in marketing and promotional expenses, up 27% compared to INR 543.7 Cr in FY21 but down 63% compared to INR 1,879.7 Cr in FY20.

OYO managed to cut more than four-fifths of its general and administrative (G&A) expenses over the last three fiscal years overall. Other expenses are inclusive in the G&A expenses along with marketing and promotional costs. In FY20, the hospitality unicorn recorded INR 2,948.02 Cr in G&A expenses, while in FY22, the sum stood at INR 515.4 Cr. The decrease of 82% can clearly be seen

The largest reduction came in a segment referred to as ‘other expenses’, which stood at a surprising INR 4,827.7 Cr in FY20. The other expenses got narrowed down to 5% in two fiscal years.

Likewise , OYO also made a cut in its employee benefits expenses significantly as well, with a major downfall during FY21. The expenditure,which stood at INR 4,765.3 Cr in FY20, shrunk to INR 1,861.8 Cr in FY22 with a decrease of almost 61%.

It becomes important to mention here that OYO laid off around 300 employees in December 2020, although media reports suggest the number of employees laid off could have reached the mark of 800.

As the unicorn changed its business model, there was a drop in the number of employees working in OYO as it came down from close to 10,000 in early 2020 to around 2,000-2,500 following the layoffs per reports by the media. 

Both metrics are up significantly as compared to FY21 even though the Gross Bookings Value and revenue from contracts with customers have not reached pre-pandemic levels.

In the current year, OYO has acquired two Europe-based hospitality startups to enlarge its footprint there. OYO also acquired Croatia-based Direct Booker for $5.5 Million in May and Denmark-based Bornholmske Feriehuse in August for an amount that was undisclosed.

The hospitality major received in-principle approval from SEBI regarding its INR 8,430 Cr ($1.2 Bn) IPO back in January 2022. However, OYO has repeatedly delayed the offer claiming it is due to the adverse market conditions, amid talks of it lessening its offer price. 

In June, It was exclusively reported that OYO will look to go public around Diwali. It was also reported that the unicorn might lessen its offer size to $800 Million, one third lower than what was previously notified.

According to the latest reports of June 30, 2022, OYO has 1,68,012 storefronts, including 12,668 hotels, 77,898 homes and 77,446 listings. 

 

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