OYO raises $660 mn debt from investors
Premium- The proposed issuance was oversubscribed by 1.7 times as it received commitments of close to $1 billion from leading institutional investors
Bengaluru: Hospitality unicorn OYO Hotels and Homes Ltd on Friday said that it raised debt funding worth $660 million from global institutional investors, including Fidelity Investments.
According to the company, the proposed issuance was subscribed 1.7 times as it received commitments of close to $1 billion from leading institutional investors. Based on the response, the debt deal was upsized and increased by 10% to $660 million, the company said in a statement.
OYO will use these funds to retire its past debts, strengthen the balance sheet and leverage the funds for other business purposes, including investment in product technology.
JP Morgan, Deutsche Bank, and Mizuho Securities served as the lead managers for this financing.
The outbreak of the covid-19 virus had severely impacted the hospitality industry worldwide. OYO was also on the receiving end of the impact and saw close to 60% of its business wiped away in a matter of months. It also laid off close to 300 employees, towards the end of last year.
However, before the second wave of the pandemic in the country, OYO’s founder and chief executive Ritesh Agarwal said that its gross margin was back to pre-covid levels.
OYO is the first Indian startup to raise capital through the term B loan (TLB) route. TLB is essentially a term loan offered with the intention of maximizing long-term total returns.
“We are delighted by the response to OYO’s maiden TLB capital raise that was oversubscribed by leading global institutional investors. We are thankful for the trust that they have placed in OYO’s mission of creating value for owners and operators. OYO is well-capitalized and on the path of achieving profitability," said Abhishek Gupta, group chief financial officer, OYO.
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Earlier this year, the company said that its focus on technology-led processes helped it become profitable in its core market of India.
“It’s heartening for me to see the strong interest from the investor community in the company, leading OYO to become the first Indian startup to be independently assessed by the world’s leading credit rating agencies— Moody’s and Fitch. Today, OYO has over 100,000 partners globally who are running successful businesses by utilizing OYO’s proprietary technology, products, and revenue management capabilities," said W. Steve Albrecht, board member, OYO Hotels and Homes, and chairman of its audit committee.
The pandemic forced OYO to pull the plug on expansion in Latin America after its biggest investor SoftBank exited the joint venture in the region.
Now the company is taking its technology platforms, including its wallet service, OYO Secure, chat service OYO Yo!, and its grievance management software for customers and property owners, OYO! Assist, to international markets in a bid to improve efficiencies and margins for its global operations.
This year, it restructured its business under three units - OYO INSEA (India and South-East Asia), which includes India, Indonesia, Malaysia and the Philippines; Oyo Europe, and OYO International.
Currently, its INSEA arm contributes to nearly 50% of its revenues and, along with Europe, accounts for 80% of gross margins, Agarwal had said in an 21 March interview. In March, OYO was adding around 500 new property owners monthly on its platform.
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