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Oyo Hotels – a leading new-age technology company is currently in an advanced stage for refinancing its existing debt of 450 million dollars. The purpose of this debt refinancing is to reduce interest rates and save on annual interest costs. This move can also benefit from an increased loan tenure.
The debt refinancing will result in material changes to Oyo Hotel’s financial statements.
As per existing regulations, the company has to revise IPO applications in such cases. So, Oyo Hotels withdrew the current application. The refinancing of existing debt will improve the financials of Softbank-backed Oyo Hotels. Post that, they will again file for the IPO as per the sources.
How Is Refinancing Beneficial To Oyo?
Oyo Hotels aims to raise funds by selling $ 450 million bonds. These funds will be used to pay the existing outstanding debt served at a higher interest rate. JP Margan will be managing the refinancing process.
The advantages for Oyo Capital through this refinancing are as follows:
- Significant lower interest cost-The existing $450 million term loan facility has an effective loan rate of 14%. The refinancing is estimated at an interest rate of 9-10%.
- Increase in Profitability-The better-negotiated interest rates will result in enormous savings of $8-10 million in 1st year after considering the costs of issuance of bonds. It will be $15-17 million in savings from 2nd year onwards. All these savings will add up to net profits.
- The extended repayment period for the existing term loan is due in 2026. That is a 5 year tenureThe refinanced is expected to be for a tenure of five years.
Oyo Hotels Operations
Oyo Hotels & Homes operates as a global technology platform. It offers accessible and reliable accommodation options for guests seeking instant bookings. It has a presence in over 35 countries globally. But India still remains its biggest market with over 10,000 hotel partners. OYO is backed by marquee investors including SoftBank, Sequoia Capital, and Airbnb.
Financials of Oyo Hotels
- The Company reported revenue of Rs. 5,464 cr in FY 2022-23 surpassing its revenue of Rs. 4,781 cr in the previous financial year.
- The Company’s loss significantly reduced to Rs. 1,287 cr in FY 2022-23 from Rs. 1,942 cr in previous financial year.
- The Company is expected to report net profits of Rs. 99 cr in FY 2023-24 as per sources.
- They reported positive EBITDA of Rs. 256.5 cr in FY 2022-23 as against negative EBITDA of Rs. 479.6 cr in the previous financial year
- The Gross Booking Value increased by a substantial 18% from Rs. 8100 cr to Rs. 9559 cr.
Oyo Hotels are making strategic changes before reapplying for the IPO. It has a promising outlook as it is moving towards profitability. Shares of Oyo are currently being traded as unlisted in India and oyo share price an attractive valuation.
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