OYO (On Your Own) is a prominent hotel chain business started in 2013 by Ritesh Agarwal, who was just a 19-year-old student back then. It was launched as Oravel Stays in 2012 but then changed to OYO the following year.
OYO is a success story. Its consolidated revenue for the financial year 2023 stood at Rs 5,463.9 crores. For FY 24 Q3 the company has reported a profit after tax of Rs. 30 crores.
An IPO Dream
According to the Economic Times, In October of 2021, OYO filed a draft application for IPO at a valuation of over $1 billion but in January of 2023, OYO’s filing for IPO was returned by the market regulators. The company then had to refile with some alterations in its prospectus. In April 2023, it made its pre-filing confidential and dropped the valuation by a significant amount about 40-60%.
Now the company has planned to withdraw its IPO application. It is now looking for private market investors to raise funds.
The Federation of Hotel and Restaurant Association of India (FHRAI) cautioned SEBI about the company’s losses and asked to reject the IPO. It mentioned the company has been losing money since it began and the public will also lose their money. FHRAI mentioned how this IPO will only fill the pockets of key members of the board and the founder.
It also raised concern about the inadequacy and inaccuracies in its Draft Red herring prospectus. Some other red flags that were raised to reject the OYO IPO were tax evasion, the company indulging in activities that are non-competitive business practices and a number of FIRs against it.
OYO Issues with Zostel
When OYO filed for Rs. 8,430 crore for IPO, it also faced issues with Zostel. OYO was about to acquire Zostel and ZO hotels in 2015 but the deal fell through and the two companies were in a legal battle for over 6 years.
Now that the company is looking to raise a new round of funding, currently they are asking for a 70% discount on the valuation. This drops their valuation from $10 billion in the previous round in 2019 to somewhere around $2.5-3 billion. Since it is ongoing the negotiations are in order and the terms may change. The company said that there was ‘no rational basis’ for the internal drop in valuation and thus, denied the news of it.
Despite the roadblocks, the company expects the growth in revenue. The founder told the employees that it expects to exceed $682 million in FY 24.
Started with an initial investment of Rs. 82 lakhs. Currently, it is backed by investors such as SoftBank, Sequoia Capital, Lightspeed Venture Partners, Qatar Insurance Company, etc.
The company provides quality and comfort to stay within budget. It partners with hotels, guesthouses, and other property owners instead of owning assets. The company then shares the revenue with hotel owners, has a well-maintained website as well as an app.
OYO has a global presence and operates in various cities of India along with areas such as Nepal, China, Malaysia, UAE, US, Europe, etc.