News Update

Oyo’s Parent Company Prefiles DRHP, Plans to Slash IPO Size to $400M-$600M: Sources

• ByStartupStory     |    March 31, 2023

Oravel Stays, the company behind the budget hospitality brand Oyo, has apparently filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) through the confidential pre-filing route.

Sources cited by The Economic Times report that insiders suggest the issue size could be lowered to a range of $400 million to $600 million. The entire amount is expected to be utilized for repaying debt through a primary issue.

Startup Story was unable to verify this report on its own.

In 2022, Tata Play, previously called Tata Sky, became the first Indian company to submit a confidential Draft Red Herring Prospectus (DRHP) to SEBI. This approach provides companies with more flexibility in determining the issue size during the initial phase.

Companies are allowed to modify the size of their initial public offering by up to 50% until the updated Draft Red Herring Prospectus (DRHP) stage through pre-filing permits. The pre-filed DRHP is not accessible to the public, but qualified institutional buyers can use it for limited marketing purposes. Confidential filings provide companies with the flexibility to go public within 18 months of filing, unlike the conventional route, where IPOs must be launched within 12 months of SEBI’s approval or final observation.

According to a report, the filing by the parent company of Oyo is currently only accessible to regulators, and a source with inside knowledge of the matter informed The Economic Times that the company opted for a confidential route due to market volatility both in India and globally.

Oravel Stays will have more flexibility in terms of timing the listing and adjusting the size of the issue according to market conditions. According to the founder of the company, Ritesh Agarwal, the adjusted EBITDA for the 2024 fiscal year is expected to be around Rs 800 crore, and the current balance sheet indicates a cash balance of Rs 2,700 crore.

Oyo’s financial performance for the first half of the 2022-23 fiscal year showed promising results, with an adjusted EBITDA of Rs 63 crore and a YoY revenue growth of 24%. Moreover, the monthly gross booking value for its hotels increased by 69%.

In November 2022, the company submitted a revised financial report to SEBI to demonstrate its progress since filing for its IPO in September 2021. The report showed that Oyo’s revenue for the 2023 fiscal year is projected to surpass Rs 5,700 crore, indicating a 19% growth compared to the previous year’s revenue of Rs 4,780 crore.

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