Reduce OYO's valuation

SoftBank may reduce OYO’s valuation by 20% to $2.7 billion; the startup refers to this as “speculation”

The valuation of hospitality unicorn OYO has been reduced by 20% by SoftBank, according to sources cited by Bloomberg. The news of the development coincides with rumours that the startup is getting ready to list on the stock market in January 2023. 

According to reports, the Masayoshi Son-led fund reduced OYO’s valuation from $3.4 billion to $2.7 billion in the June quarter.

One of the most valuable start-ups in India in 2019 was OYO, with a $10 billion valuation. Numerous investors, including Lightspeed Ventures, Sequoia India, Airbnb, Didi Chuxing, and others, have backed it.

In September 2021, the firm submitted a draught Red Herring Prospectus to the Securities and Exchange Board of India (SEBI). Recently, the company filed an update to that document. The corporation provided financial information for the years FY20, FY21, and FY22 in the addendum. It also disclosed financial information for the current fiscal year.

The parent business of OYO, Oravel Stays Private Limited, generated an adjusted gross profit of Rs 1915.9 crore in FY22 (up from Rs 1313.7 crore in FY21), and it generated an AGP of Rs 602.2 crore in the first quarter of FY23.

A report claiming that the valuation of OYO has been slashed has, however, been denied by the company. 

“We are confident that the above speculations about valuation markdown are patently incorrect. Valuation is an outcome of business performance.  As per our latest audited results, we have clocked Rs7 crore maiden adjusted EBITDA profit in the June quarter, at 41 per cent gross profit margin and a 45 per cent increase in gross booking value per hotel per month versus last financial year. These are dramatically improved results and the strong performance trajectory is expected to continue. Hence, there is no rational basis for a markdown. We have not decided the exact timing for the IPO and the IPO valuation is also highly speculative,” the company spokesperson addressed.

SoftBank has not yet provided a response to this.

According to its DRHP, OYO wants to raise Rs 7,000 crore for its impending IPO through a new equity share offering and a Rs 1,430 crore offer for sale. 

Ritesh Agarwal launched the business in 2012. Agarwal’s pay has, incidentally, increased by 250%. It increased from Rs 1.6 crore in FY21 to Rs 5.6 crore in FY22.

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