OYO's Ambitious Move | Seeks $400 Million Funding for IPO from Malaysia's Khazanah at $6 Billion Valuation

OYO's Ambitious Move | Seeks $400 Million Funding for IPO from Malaysia's Khazanah at $6 Billion Valuation

OYO's Ambitious Move | Seeks $400 Million Funding for IPO from Malaysia's Khazanah at $6 Billion Valuation

Introduction : 

Oyo Hotels & Homes, the Indian hospitality giant backed by SoftBank Group, is actively pursuing a substantial funding round of $400 million from Malaysia's Khazanah Nasional Berhad, a sovereign wealth fund. 

The purpose behind this financial move is to fuel Oyo's expansion initiatives and alleviate existing debts. 

Avendus Capital is providing advisory support for this funding endeavor.

Khazanah Takes the Lead :

Khazanah Nasional Berhad is reportedly spearheading the discussions to lead the $400 million funding round for Oyo. 

This sovereign wealth fund has been increasing its investments in India, engaging with notable entities like logistics provider Xpressbees and the fast-food chain Wow! Momos.

IPO Plans and Reduced Valuation :

Founded by Ritesh Agarwal, Oyo filed for its initial public offering (IPO) for the second time in March, with a noteworthy reduction in the target amount, signaling caution. 

Despite the travel market's post-pandemic recovery, Oyo is yet to determine the optimal timing for its IPO. 

The company, once valued at around $10 billion, is now aiming for a valuation of $6 billion.

Ongoing Discussions and Other Investors Involved : 

While the discussions with Khazanah are in progress, Oyo is concurrently exploring talks with other potential investors for this funding initiative. 

The final decision from Khazanah is pending, adding a layer of uncertainty to the outcome.

Financial Snapshot :

As of the twelve months ending March 2023, Oyo disclosed a net loss of 13 billion rupees (approximately USD 156 million).

This financial disclosure underscores the significance of the funding round for the company's financial health.

New Funding After Two Years :

If the funding round with Khazanah materializes, it would mark Oyo's first substantial funding in two years, indicating a pivotal moment for the company's growth trajectory.

Avendus Capital's involvement in advising on the deal further highlights the strategic importance of this funding endeavor.

Utilization of Fresh Capital : 

Bloomberg reports suggest that Oyo intends to utilize the fresh capital for both expansion and debt repayment. 

Notably, the company had taken a significant $660 million term loan debt in July 2021, and this funding would contribute to alleviating that financial burden.

Financial Health and Leadership Changes :

Oyo, buoyed by the easing of COVID restrictions and a resurgence in tourism, has been actively working towards improving its financial health. 

The recent elevation of Rakesh Kumar to the position of chief financial officer reflects the company's commitment to bolstering its finance and operational growth.

Conclusion :

In conclusion, Oyo's strategic move to seek $400 million funding from Malaysia's Khazanah presents a pivotal moment in the company's journey, especially considering its IPO aspirations. 

The ongoing discussions, involvement of other investors, and the intended utilization of funds for expansion and debt reduction underscore the significance of this financial maneuver for Oyo's future growth.

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