Days after Japanese investor SoftBank Group has reduced the valuation of OYO Hotels IPO in its books by over 20 per cent to $2.7 billion in the June 2022 quarter, the startup’s shares have reported a sell-off in the private market where its valuation has also dropped from $8 billion to $6.5 billion, according to a PTI report.
When OYO updated its financials in its draft prospectus last month, reporting positive EBIDTA besides the narrowing of losses, the company’s share price in the private market had risen to Rs 94 per share. However, in the subsequent days following reports of the markdown of OYO’s valuation by SoftBank, the company’s valuation fell about 13 per cent to Rs 81 per share, said the PTI report said quoting a source.
In an e-mailed response to PTI, Analah Capital CEO & Founder Vaishali Dhankani said, “Last year, transactions (of OYO shares) in private markets happened at around $8 billion range but in the recent past transactions are happening up to $6.5 billion valuation."
He added that some of OYO’s “past distractions seem to have gone away and one anticipates a stronger bottomline and sticking to its knitting".
Later last month, SoftBank cut the valuation of OYO Hotels after benchmarking it against peers with similar operations. The startup was aiming a valuation of $9 billion in its IPO after preliminary talks with potential investors.
OYO plans to launch its IPO later this year or early 2023. The listing plan follows a stellar debut by food delivery firm Zomato Ltd in July. Berkshire Hathaway Inc-backed Paytm and private equity firm TPG-backed Nykaa have also filed for IPO. Ride-hailing firm Ola, which is also backed by SoftBank, is also set to enter markets.
According to the fresh DRHP, for the full financial year 2021-22, OYO’s total loss stood at Rs 2,139.9 crore, compared with Rs 4,103.3 crore in 2020-21. Its adjusted Ebitda loss came at Rs 471.7 crore in 2021-22, against a loss of Rs 1,744.7 crore in FY21.
OYO, in which SoftBank owns a 46 per cent stake and is one of its biggest bets, has endured months of layoffs, cost-cuts and losses during the global health crisis.
In the first quarter of the current financial year, it reported a loss of Rs 413.9 crore. However, it said it has turned operationally profitable for the first time in the same quarter, before accounting for costs related to its employee stock option grants. Its adjusted Ebitda (earnings before interest, taxation, depreciation and amortization) stood at Rs 7.26 crore before ‘share-based expenses’.
It also said its general and administrative expenses declined 44.4 per cent to Rs 515 crore in FY22, compared with Rs 926 crore in FY21. OYO’s revenue from contracts with customers in FY22 jumped 20.7 per cent year-on-year to Rs 4,781.3 crore. Its revenue from contracts with customers in the June 2022 quarter stood at Rs 1,459.3 crore.