Reports say SoftBank has reduced Oyo's valuation to $2.7 billion from $3.4 billion

23 Sep 2022 , 07:44 AM

As the Indian start-up gets ready for an IPO, SoftBank Group Corp. has reduced the valuation of Oyo Hotels on its books by more than 20%, according to news reports.

The reports said that the Japanese corporation, the largest shareholder in the hotel booking company, reduced its estimated value for Oyo to $2.7 billion in the June quarter from an earlier $3.4 billion after benchmarking it against peers with similar operations. An investment round in 2019 valued the lodging company at $10 billion.

Following cost reductions and a rebound in travel, Oyo, formerly known as Oravel Stays Ltd., filed a fresh batch of financial documents with India’s market regulator on Monday as it prepared for a public market debut.

According to the reports, the company anticipates receiving approval from the Securities and Exchange Board of India for the public debut shortly and plans to enter the market at an estimated $5 billion valuation at the beginning of next year. Oyo hasn’t made up its mind about going public yet; depending on the market, its plans may alter.

According to preliminary negotiations with possible investors, the business was aiming for an IPO valuation of approximately $9 billion, according to a January story by Bloomberg News. The company stated in its initial filing in September of last year that it intended to generate $1 billion through the sale of both new and existing investor shares totalling Rs84.3 billion.

“We are certain that the valuation markdown speculations mentioned above are demonstrably false. “Business performance has an impact on valuation,” the startup claimed in a statement to ET. The specific timetable of the IPO has not yet been determined, and its valuation is likewise rather speculative.

According to Oyo’s most recent disclosures, sales increased and losses shrank during the fiscal year that ended in March 2022 and the three months that followed. For the year ending in March 2022, it reported a loss of 18.9 billion rupees, almost halving from the prior 12 months.

However, when macroeconomic uncertainties increased, investors all over the world sold off stocks, resulting in lower valuation multiples for tech businesses this year.

With comparisons to his backing of WeWork and its quirky founder Adam Neumann, the company has been one of SoftBank founder Masayoshi Son’s more contentious startup ventures. Ritesh Agarwal, the founder of Oyo, has been pressured to swiftly grow in regions like Japan and the US by Son, with disastrous results.

SoftBank calculates the value of its holdings each quarter and records any changes as a profit or loss on its income statement. SoftBank is an investor in hundreds of private firms. In the June quarter, it recorded a record loss of $23.4 billion due to falling portfolio valuations and foreign exchange losses.

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