Oravel Stays Pvt Ltd, which operates the hospitality unicorn Oyo Hotels and Homes, has filed for a Rs 8,430 crore ($1.1bn) initial public offering (IPO) which will see some of its investors including Softbank Group book a partial exit.
The issue will comprise a primary capital raise of around Rs 7,000 crore and with other investors selling Rs 1,430 crore worth of shares.
Softbank Group, which owns over 46% stake in the company, is selling shares worth Rs 1,328.53 crore. At a conservative IPO valuation of $10bn, this would amount to less than 2% dilution for SoftBank, a person briefed on the deal said.
Grab, which invested $100 mn in Oyo in 2018, is selling approximately Rs 51.6 crore worth of shares.
HuaZhu Hotels or China Lodging Holdings, which invested in 2017, is selling approximately Rs 23.13 crore in the offering.
The family firm of Sunil Munjal of the Hero Group is also selling shares worth Rs 26.71 crore.
Oyo’s 27-year old founder Ritesh Aggarwal will not be selling shares. Other investors such as Sequoia Capital and Lightspeed Ventures are also not selling shares in this IPO.
The company has also added Olympian Deepa Malik to its board as an independent director.
Other board members include Ritesh Agarwal, Lightspeed Venture Partners founder Bejul Somaiya, former president of Indigo Airlines former Oyo Chief executive in India and South Asia, Aditya Ghosh, Former COO of Starbucks Troy Matthew Alstead and William Steve Albrecht, who is the former chief executive of American Accounting Association, according to the draft papers.
Bankers to the issue include Kotak Mahindra Capital, Citigroup, JP Morgan, ICICI Securities, Nomura, JM Financial and Deutsche Bank.
Currently, Ritesh Agrarwal holds 8.21% stake while an affiliate promoter firm RA Hospitality Holdings Cayman has 24.94% stake.
In 2019, Agarwal bought back a portion of shares from investors Sequoia Capital and Lightspeed Ventures via RA Hospitality Holdings. Sequoia Capital India Investment has 3.24% stake while Lightspeed Venture has 2.74% stake in Oravel Stays.
Currently, Softbank Group owns 46.62%, Grab owns 1.81%, Huazhu Hotels has 0.81%, while the Munjal family own 0.04% stake in the firm.
The proceeds from the issue worth Rs 2,441 crore will be used to pay off debt debt owed by its subsidiaries that include Oravel Stays Singapore Pte Ltd, Oravel Hotels LLC and Oyo Hospitality Netherlands BV, Oyo Singapore and OHL.
As of July 2021, on a consolidated basis, the firm had total outstanding borrowings of Rs 4890.56 crore
For fiscal year 2021, its total income stood at Rs 4157.39 crore against Rs 13413.27 crore a year ago. Net loss for the period was at Rs 4102.28 crore against Rs 11079.79 crore last year.
Oyo joins a wave of startups including PayTM, Nykaa, Ixigo, and Policy Bazaar who have filed for an IPO this year.
In a percursor to the filing, Oravel expanded its share capital from Rs 1.17 crore to Rs 901 crore earlier this month.
Meanwhile Oyo is also fighting a legal battle in court against Zostel Hospitality Pvt Ltd which runs Zo Rooms. Oyo had agreed to purchase Zo Rooms in 2015, but the deal fell through. Zostel approached the Delhi High Court last month to prevent Oyo from making any changes to its cap structure, including through an IPO.
Note: This copy has been updated to reflect that SoftBank's dilution in the IPO would be less than 2%.