Soft Bank and Airbnb backed budget hotel aggregator OYO, on Friday, filed preliminary documents with SEBI for a ₹8,430-crore initial public offering (IPO). The IPO will consist of a fresh issue of shares of up to ₹7,000 crore and an offer for sale of ₹1,430 crore, according to the draft red herring prospectus (DRHP) filed with SEBI.
Pre-IPO placement
“Our company, in consultation with the lead managers, may consider a pre-IPO placement for an aggregate amount not exceeding ₹1,400 crore. It will be completed prior to filing of the red herring prospectus with the RoC,” said the statement.
According to the DRHP, SoftBank’s arm SVF India Holdings (Cayman) Ltd, A1 Holdings Inc, China Lodging Holdings (HK) and Global IVY Ventures LLP are among the entities selling some of their shares in the IPO.
While founder Ritesh Agarwal and his holding company has a combined 33.15 per cent stake, the Japanese conglomerate SoftBank owns 46.62 per cent of OYO and AirBNB another 1.36 per cent.
OYO was originally incorporated as Oravel Stays Private Limited in New Delhi.
Delayed profitability
The company has been incurring losses each year since incorporation, and the company’s ability to achieve profitability may be delayed, it said. OYO incurred losses of ₹2,364.53 crore in FY19, ₹1,3122.78 crore for FY20 and ₹3,943.84 crore in FY21.
“Historically, we have invested significantly in efforts to grow our platform and network, expanded our solutions and offerings, introduced new technology products, increased our marketing spend, hired additional employees and enhanced our platform.
“From the second quarter of 2020, in order to mitigate the economic impact of the Covid-19 pandemic on our business, we significantly reduced our fixed and variable costs, including reducing our employee benefits expenses and marketing and promotion expenses,” said the statement.
The statement said that “If we do not continue to innovate and develop our platform, our platform developments do not perform or we do not keep pace with technological developments, we may not remain competitive and our business and results of operations could suffer.