Airbnb (NASDAQ: ABNB) competitor OYO Hotels and Rooms is rumored to be preparing for an IPO next week. The IPO is expected to take place in Mumbai, which is considered India’s financial capital. And it’s projected to raise between $1bn and $1.2bn (₹8,000 crores). OYO is reportedly working with JP Morgan, Citi Bank, and Kotak Mahindra Capital.
The IPO will issue fresh capital while also giving existing shareholders a chance to take profits. It’s thought the company may use the proceeds to start paying off debt. The pandemic has posed a challenge to OYO, and it recently raised $660m in debt funding.
What is OYO?
OYO is a global travel platform that gives the owners of hotels and homes access to full-stack technology.
Led by 27-year-old founder Ritesh Agarwal, the Indian start-up has streamlined the booking process to improve host profits and ease operations while enhancing user experience.
OYO aims to bring about a wide range of affordable and trusted accommodation that guests can book instantly. Its parent company is Oravel Stays Pvt Ltd.
Overcoming bankruptcy rumors
Earlier this year, there were rumors OYO was facing bankruptcy, but these turned out to be false.
There is a PDF and text message circulating that claims OYO has filed for bankruptcy. This is absolutely untrue and inaccurate. A claimant is seeking INR 16Lakhs (USD 22k) from OYO’s subsidiary leading to a petition at NCLT. 1/3
— Ritesh Agarwal (@riteshagar) April 7, 2021
OYO did not file for bankruptcy
With vaccine rollouts well underway, OYO believes trade will resume to pre-Covid-19 levels in India and Europe in the coming months.
Before global lockdowns, OYO reached a valuation of $10bn. The company has not yet filed its draft red herring prospectus (DRHP) – the Indian equivalent to an S-1 filing. But it hopes to do so shortly.
Notable investors
SoftBank Group has a 46% stake in OYO, adding weight to its credibility and shining a light on its potential. Despite being a competitor, Airbnb has invested in OYO.
Last month, Microsoft (NASDAQ: MSFT) partnered with OYO to invest $5m in the group.
OYO plans to adopt Microsoft Azure, its cloud-based platform. And together, they will develop ‘Smart Room’ experiences for travelers, such as premium and customized in-room experiences for guests.
The partnership stands to improve OYO’s offerings by integrating with the cloud to give businesses in the remotest parts of the world an enhanced experience. And it should enhance the guest experience with personalization and improved choice.
Anant Maheshwari, president, Microsoft India, said:
“It is inspiring to see how the Microsoft cloud is empowering digital natives like Oyo to accelerate industry transformation and innovations, turning the challenges of a post-pandemic era into opportunities for the future,”
Tech unicorns galore
India is welcoming a flurry of tech unicorns this year. OYO is one of many Indian tech unicorns to have announced plans to go public. Others include CarTrade Tech, Ola, Paytm, PolicyBazaar, Nykaa, Mobikwik, and Zomato.
Food delivery firm Zomato (NSE: ZOMATO) went public in July, while PolicyBazaar and Nykaa IPOs are due next month.
Paytm is backed by Warren Buffett’s firm Berkshire Hathaway (NYSE: BRK.A). Meanwhile, Nykaa is supported by the private equity group TPG. And ride-hailing firm Ola is another backed by SoftBank.
Is OYO a good investment?
While the tide on Covid-19 appears to be turning, there are not yet any guarantees. This means OYO still faces challenges ahead. It is a strong company that has merged some impressive partnerships and investors. It’s certainly worth watching this space.