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OYO Pre-files New DRHP For $400-500 Mn Main Fundraise

The secondary sale component of the IPO has been dropped, and the issue's goal is to repay the majority of its obligations

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Hotel aggregator Oyo has pre-filed a new draught red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) to collect USD 400-500 million through an initial public offering (IPO), according to sources.

The IPO size may be revised within the USD 400-600 million range because the confidential pre-filing route allows for the option to alter the fresh issue size. The previous plan for a secondary sale component in the IPO has been scrapped, and the issue's goal is to repay the majority of the debt.

Late in 2022, the market supervisor returned the DRHP, requesting that Oyo resubmit the prospectus with updated information. According to Oyo, the refiling procedure could take up to two to three months.

SEBI permitted the pre-filing route option in November 2022 as part of introducing progressive and globally popular practices. The option is accessible in major global markets such as the United States, the United Kingdom and Canada.

It provides companies with more freedom on issue size during the initial stage, as opposed to the conventional method, which requires companies to launch the IPO within 12 months of SEBI approval, or final observation.

The pre-filing route enables an IPO to be launched within 18 months of SEBI's final comments.

This path also allows for a 50 per cent increase in main issue size until the Updated Draft Red Herring Prospectus stage.

“The market continues to be highly volatile globally and to some extent in India,” a source close to the business explained as to why the company chose the pre-filing route.

The pre-filing route would allow Oyo some flexibility in terms of timing and fine-tuning the issue size, based on market conditions, to between USD 400 and 600 million, all of which will now be a primary issuance, to repay the majority of its debt. However, for the time being, an issue with timing around Diwali is likely once SEBI approves, the source said.

Oyo's most recent SEBI submission, in November 2022, was for its updated results for the first half of the fiscal year 2022-23, claiming that potential investors should be made aware of the material improvement in its business performance since its original IPO application in September 2021.

A review of the updated financials revealed a rebound in topline revenue, an increase in gross margins, and a reduction in total losses.

In H1 FY2023, it reported its first positive Adjusted EBITDA of Rs 63 crore, a 24 per cent year-on-year rise in revenue, and a 69 per cent increase in monthly booking value (GBV per month) for its hotels.

Founder Ritesh Agarwal stated in an employee town hall on 27 March that "the company expects to clock Adj. EBITDA of nearly Rs 800 crore in FY2024, that is, the upcoming fiscal year and we are taking steps to maintain a robust cash runaway while remaining cost-effective.

“We have a current cash balance of approximately Rs 2,700 crore, and we hope to use very little of it for existing operations. Our cash flow has improved, and our reliance on outside funds has steadily decreased,” Agarwal said.

According to Agarwal, the performance could be attributed to sustained growth in India, Indonesia, the United States, and the United Kingdom, as well as pertinent optimisation and synergies in its European vacation home business.

Oyo's adjusted EBITDA for H2, FY2022-23, is anticipated to triple to around Rs 185 crore, marking the company's first financial year of adjusted EBITDA profitability, according to him.

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