SoftBank-backed OYO is set to refile its much-anticipated IPO as it finalizes plans to raise up to $450 million through the sale of dollar bonds, according to sources. JP Morgan is expected to lead the refinancing effort, with the bonds projected to carry an interest rate of 9-10% per annum.
To prepare for this refinancing, OYO has withdrawn its current draft red herring prospectus (DRHP) from the Securities and Exchange Board of India (SEBI). The company plans to submit an updated DRHP following the bond issuance. In November, Oravel Stays Ltd., OYO’s parent company, prepaid a substantial portion of its debt—amounting to ₹1,620 Crore—through a buyback process, reducing its outstanding Term Loan B (TLB) from $660 million to approximately $450 million.
A source involved in OYO's IPO plans mentioned to PTI, "The refinancing will result in material changes to OYO’s financial statements. Hence as per existing regulations, it will need to revise its filings with the regulator. Since the decision for refinancing is at an advanced stage, it doesn’t make sense to continue pursuing IPO approval with the current financials. So it’s prudent to withdraw the current application."
The refinancing will extend the repayment timeline to five years, compared to the repayment of the remaining TLB due in 2026. This move is expected to lower the current effective interest rate of 14% on OYO's existing $450 million TLB facility. The refinancing is projected to save the company $8-10 million (₹66.4-83 Crore) in annual interest costs in the first year, and $15-17 million (₹124.5-141.1 Crore) annually thereafter, contributing significantly to net profits. Post-refinancing, OYO may consider an equity round to bolster investor confidence before a public listing, thereby strengthening its financial position.
In September 2021, OYO filed preliminary documents with SEBI for a ₹8,430 Crore IPO. However, volatile market conditions delayed the launch, prompting the company to aim for a lower valuation of $4-6 billion, down from the initial $11 billion target.
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