H World Group, which owns 0.78% of OYO through one of its subsidiaries, decided to sell approximately 1 crore shares, about 0.15% stake, on a fully diluted basis. The deal happened in a series of transactions throughout 2022.
UAE-based family offices and institutional investors purchased these shares. Due to the equity sale, H World Group earned more than INR 75 crore.
On a fully diluted basis, this reflects a 0.15% stake sale. H World Group’s return on investment from this partial exit is an amazing 500%. Following the sale, its stake in OYO has shrunk to 0.63%, worth over INR 300 crore.
H World Group’s strategic decision to re-allocate its investments
While the precise reasons for H World Group’s stake dilution are not stated, the action may be part of a larger financial strategy or portfolio adjustment by H World Group.
Despite the equity decrease, H World Group retains residual ownership in OYO worth more than INR 300 crore. This shows that H World Group is still interested in the company and believes in its prospects.
In Conclusion, H World Group’s equity sale strengthens OYO’s financial situation, allowing the business to repay its debt by issuing new shares.
OYO is preparing for its IPO!
As OYO, the traveltech unicorn, prepares for its highly anticipated initial public offering (IPO). OYO’s IPO plans have caught investors’ interest, with the business initially intending to raise INR 8,430 crore ($1.2 billion) through its market offering.
However, in response to regulatory guidelines, OYO was directed to refile its draught red herring prospectus (DRHP). It subsequently chose the confidential pre-filing option, decreasing the IPO size to $400-600 million.
In the future, OYO’s IPO will produce funds by issuing new shares. The major goal is to repay the company’s debt, strengthen its financial position and support its expansion goals.
The smaller IPO size corresponds to OYO’s increased cash flow and less need for external capital. Ritesh Agarwal, the founder of OYO, emphasised this.
OYO to Achieve Positive EBITDA by The End of Fiscal Year 2024
OYO’s financial status has greatly improved despite its reduced size. This outstanding achievement is due to increased bookings, particularly in Europe. Moody’s, the respected credit rating agency, is similarly bullish, predicting OYO to achieve positive EBITDA (after ESOP payments) by the end of the fiscal year 2024.
Surprisingly, despite improving business performance and strong financial indications, OYO’s valuation has remained constant at $6.6 billion. This is significant in a market where start-up prices frequently fluctuate dramatically.
The most recent secondary market transaction in October last year similarly valued it at $6.6 billion.
OYO’s Growth Plans
OYO has big expansion plans to strengthen its footprint in major markets. One of its key goals is to double the number of premium hotels in India.
It will add around 1,800 hotels to its portfolio.
It is making a heavy emphasis on brands such as Townhouse, Collection O, and Capital O. By increasing its offers in India, it hopes to reach a wider variety of travellers and provide them with high-quality lodging options.
OYO is also considering expanding into the UK market. With over 150 hotels now in place nationwide, it intends to expand its UK portfolio by more than 50 properties by 2023.
Moreover, it has its sights set on the United States, to add over 100 hotels by 2023. It hopes to capitalise on the enormous growth opportunities the US market offers.
About H World Group, The Chinese Hospitality Giant
H World Group was previously known as Huazhu Group Limited, a Chinese hospitality firm that has significantly contributed to the global hospitality industry.
H World Group operated an enormous portfolio of hotels, with a remarkable 8,176 hotels and 773,898 rooms across 17 countries.