According to sources, Oyo secured Rs 1,000 crore in funding from the Indian family offices of top Indian corporate executives and stock market experts. Expected investors include corporate strategy advisor and former Reliance Industries senior executive Anand Jain, Mankind Pharma promoters Ramesh and Rajeev Juneja, and Utpal Sheth, a close associate of the late market expert Rakesh Jhunjhunwala.
Family offices are becoming a key source of capital for modern companies. Oyo, which recently withdrew its IPO application, will hold an extraordinary general meeting (EGM) on Tuesday to approve the fundraising after increasing its authorized share capital. The Economic Times has reviewed the EGM notice.
Oyo’s Funding Plans and Valuation
Oyo, a company backed by SoftBank Group, is set to raise funds that would value it at around $2.5 billion. This marks a significant drop from its peak value of $9 billion in 2021, signaling a major decrease in valuation.
Oyo is also in the final stages of talks with Malaysian sovereign wealth fund Khazanah Nasional. They are discussing certain terms before finalizing the deal.
According to sources, the funding from family offices totals approximately Rs 1,000 crore. Oyo plans to allocate a portion of this funding to Khazanah Nasional, aiming to enhance the credibility of its investor base.
According to sources, Ritesh Agarwal, Oyo’s founder, and CEO, plans to raise Rs 250 crore – Rs 300 crore from Khazanah and the remaining amount from Indian investors. Incred Wealth is assisting Oyo in presenting the fundraising opportunity to a group of wealthy individuals. They have set up a special entity to issue shares of Oyo’s parent company to participating family offices.
Details from the EGM Notice
Oyo is considering approving an initial fundraising round of approximately Rs 500 crore, as stated in the EGM notice. The company expects to finalize the total funding, including contributions from family offices and institutional investors, by the end of the month.
Most investors are expected to contribute between Rs 15 crore – Rs 30 crore each, although some may invest more. Despite the current valuation, investors entering at this stage could potentially see substantial returns if Oyo goes public at a higher valuation. Oyo, Incred Wealth, and Khazanah did not respond to queries from ET as of press time on Sunday.
Recently, Ritesh Agarwal has hosted webinars and one-on-one calls with investors to explain Oyo’s business and future plans. Several investors who participated in these calls confirmed these discussions.
SoftBank’s Valuation Adjustment
In 2022, SoftBank, Oyo’s largest investor, privately adjusted its company valuation to $2.7 billion, down from $3.4 billion. Family offices are increasingly investing in consumer internet firms like Oyo. In the past year, prominent startups such as FirstCry, Bluestone, and Purplle have received substantial investments from these family offices.
Currently, there are approximately 300 family offices in India. Experts predict they could contribute 25-30% of startup funding in the coming years. These investors are also showing interest in late-stage startups preparing for IPOs. Investors, particularly family offices, are focused on startups with sustainable business models that can generate profits. They look for attractive valuations and plan to exit through IPOs or mergers and acquisitions.
Oyo’s Investment Appeal
Investors see Oyo as an opportunity to invest at a favorable price now and potentially sell at a higher price in the future. They have conducted thorough financial assessments of Oyo for this investment round. Oyo has withdrawn its applications for an IPO two times so far.
Oyo’s Recent Performance and Business Strategy
Financial Performance and Projections
According to sources familiar with its performance, Oyo announced its first annual net profit of Rs 100 crore for FY24 and expects higher profits this fiscal year.
In meetings with investors, Oyo has projected a gross booking value of $1.8 billion for FY25, up from $1.2 billion in FY24. Revenue is projected to reach $957 million for FY25, compared to $657 million in FY24. These figures are unaudited and pending filing with the Registrar of Companies.
Business Strategy and Market Focus
Oyo, significantly impacted by the pandemic, has recovered demand and restructured its operations. In India, it primarily focuses on hotel aggregation services, while in Europe, it concentrates on home rentals following the acquisition of Amsterdam-based Leisure Group in 2019.
The company operates 95% of its storefronts in key growth markets such as India, Europe, Malaysia, and Indonesia. It has scaled back operations in the US and China.
Oyo’s Financial Outlook and Strategy
Financial Projections
Oyo has informed potential investors that it expects to achieve $406 million in adjusted gross profit and $181 million in adjusted EBITDA for FY25. According to sources familiar with the company’s actions, the company has significantly reduced employee benefit expenses by 82% and marketing expenses by 60%.
Business Performance Highlights
Oyo emphasized its industry-leading ‘take rate,’ which is the revenue it earns per hotel booking. Additionally, it projected a compounded annual growth rate of 28% in gross order value from FY25 to FY29.
Debt Situation
Sources familiar with Oyo’s financials mentioned that the company needs to manage over $300 million in debt, a goal it aims to complete by next year.
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