OYO expects FY23 revenue to be over Rs 5,700 crore, says CEO Ritesh Agarwal

In the presentation, Agarwal said OYO's revenue for FY23 is expected to be over Rs 5,700 crore, up around 19 percent from the Rs 4,780 crore achieved in FY22.

Agarwal outlined that the key focus areas of OYO in the 2023 calendar year will be on Profit After Tax (PAT) along with consistent momentum in earnings before interest, taxes, depreciation and amortisation (EBITDA); achieve cash flow positive in FY24; cost efficiency and improving contribution margins and making storefront additions, among others.

On another note, OYO Hotels is reducing the shares it is looking to sell via a stock market debut by around two-thirds, an effort by its CEO and founder Ritesh Agarwal to get the sale completed even after the tech valuations plunged.

The once-high-flying company is preparing to file a fresh initial public offering document as soon as this week, two people familiar with the matter told news agency Bloomberg. In the filing, OYO will outline plans to sell just a third of the new shares it originally planned, eroding the amount of fresh capital it is expected to receive, one of the people said.

The plan shows how founder Ritesh Agarwal, 29, is trying to push through an IPO even at weaker terms to alleviate the financial pressures on the hotel and lodging booking company and himself. While the travel market has improved from the pandemic-era trough, OYO — once valued around $10 billion as India’s Airbnb-equivalent — is still reporting mounting losses.

Agarwal, meanwhile, took on billions of dollars of debt to boost his holding in the firm.

The situation remains fluid and Agarwal or OYO may still fine-tune their targets. It’s the second attempt at an IPO by the SoftBank Group Corp.-backed startup, after India’s stock market regulator raised multiple red flags on its earlier try in late 2021. Since then, valuations of technology companies have declined after accelerating inflation and rising interest rates left customers with less to spend and raised concerns of a potential recession.

No shares will be offered for sale by Oyo’s current investors, the people said. SoftBank holds about half of the startup, which is formally called Oravel Stays Ltd. and also counts Airbnb Inc. among its backers.

Oyo didn’t immediately respond to emails, texts and calls seeking comment.

The company was targeting a valuation of about $9 billion and updated its IPO documents in early 2022, but SoftBank later that year reduced its estimate for Oyo to $2.7 billion. The IPO valuation will be finalized through a book-building process nearer to the listing but it’s set to be far from what the company originally envisaged.

Agarwal, his holding company RA Hospitality Holdings and SoftBank Vision Fund remain the company’s three promoters with no change from its 2021 prospectus, according to one of the people. In 2019, Agarwal increased his stake to 33 percent at a $10 billion valuation after taking on $2 billion of debt from Japanese lenders in his personal capacity with the backing of SoftBank founder Masayoshi Son.

That puts an urgency to Agarwal and Oyo’s SoftBank-dominated board to push through an IPO despite the punishing environment for tech IPOs and high-profile failures by Indian startups in the past 18 months, one of the people said. It would be a way to prove to the Japanese lenders that the founder and his startup are still worth billions.

When Agarwal got married this month in Delhi, Son took a rare trip from his Tokyo base to attend the celebration, accompanied by a bevy of SoftBank executives.

While Agarwal isn’t legally required to detail his personal debts in the IPO draft prospectus, he has been warned that regulators could still view that as an investor risk and indefinitely delay or reject the IPO on other technical grounds, one of the people said.

In January, OYO was asked by SEBI to refile the draft IPO (Initial Public Offering) papers with certain updates. In September 2021, OYO had filed preliminary documents with SEBI for a Rs 8,430 crore-IPO.

The IPO was delayed due to the then volatile market conditions making the company prepare to settle for a lower valuation at around USD 7-8 billion instead of the USD 11 billion it was targeting initially.