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Oyo, the hospitality unicorn of India, is in negotiations with investors to secure a new round of funding. This could reduce the company's valuation to $3 billion or less, as reported by Techcrunch.
Oyo is currently in discussions with potential investors to raise money. The investors include Khazanah, Malaysia's sovereign wealth fund, for a fresh round of financing. The startup's valuation could drop to $2.5 billion due to secondary transactions that might occur during this round of funding.
SoftBank owns 46% of OYO. It revised the startup’s valuation to $2.7 billion in 2022. The company has denied the valuation downgrade. It stated that it lacked a “rational basis.”.
As per the report, a company spokesperson said, “Oyo continues to focus on better performance and higher earnings and engages with esteemed investors from time to time when approached, but there is no concrete transaction, let alone a valuation discussion at this stage.”
Oyo: Preparing for an IPO
Oyo recently pulled its draft red herring prospectus from SEBI and plans to resubmit the IPO documents. This decision is linked to the ongoing refinancing of a $450 million loan.
Once this process is complete, the company might reapply for an IPO with updated and improved financial statements. The goal of this refinancing is to obtain a more favorable interest rate for the $450 million Term Loan B.
Oyo's Refinancing: A Work In Progress
According to the provided source, the refinancing is anticipated to lead to a reduction in annual interest expenses of $8-10 million (Rs 66.4-83 crore) in the initial year. This calculation takes into consideration the expenses linked to issuing the bond.
Additionally, there is a projection of annual savings of $15-17 million (Rs 124.5-141.1 crore) in the following years. These savings are expected to significantly contribute to the company's net profits.
After restructuring its debt, the company is considering raising funds through the sale of stocks to investors to rebuild trust and confidence before going public.
Insights Into Oyo's Financials
OYO has consistently shown strong performance, exhibiting various positive aspects.
- Oyo's operating costs decreased to 14% of gross booking value in FY24, compared to 19% in the previous year.
- Improved operational performance, stable gross margins, and cost efficiencies contributed to this profitability.
- A reduction in interest costs was achieved through a part prepayment of $195 million in debt during a buyback process in the quarter that ended in December of the previous financial year.
- The company recorded a profit after tax of Rs 99.6 crore in FY24.
- Adjusted earnings before interest, tax, depreciation, and amortization increased to Rs 888 crore in FY24, a significant rise from Rs 274 crore in the previous year.
OYO Unlisted Shares: A Potential Investment?
Investing in the unlisted shares of Pre-IPO companies can be one of the ways to diversify your investments
Shares of OYO, an unlisted company, have performed well. It showcases various strengths like
- The company’s revenue for the fiscal year ending in March exceeded $682 million.
- In FY 2022, OYO reported a revenue of Rs 4,781 crore, surpassing the previous year's revenue of Rs 4,157 crore.
- The company's gross margin rose from 36.31% in FY21 to 41.42% in FY22.
The current oyo share price is trading around Rs 35-40 per share. Buying unlisted shares of OYO could be beneficial as the price may rise when the company issues its IPO later this year. However, as with any investment, there are risks involved, and investors should do their due diligence before investing in OYO unlisted share
Detailed company financials can be viewed on Stockify, India's top destination for purchasing unlisted shares of high-performing Pre-IPO companies. Join our WhatsApp group here to get regular updates for trending unlisted shares
