Oyo filed a fresh round of financial documents with India’s market regulator as it plans for a stock market debut after cost cuts.
Japan’s SoftBank Group Corp. has reduced the valuation of Oyo hotels on its book by 20% as the formerly high-flying Indian startup gets ready for an IPO.
The people, who asked not to be identified because the information is private, said that the Japanese investor, 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. A funding round in 2019 valued the lodging company at $10 billion.
Oyo filed a fresh round of financial documents with India’s market regulator as it plans for a stock market debut after cost cuts and recovery in travel helped it reduce losses. Oyo aims to tap the market at a valuation of about $5 billion next year as soon as the SEBI approves its public debut. Depending on the market condition Oyo could still change its plans about IPO.
According to preliminary conversations with potential investors, the startup was aiming for an IPO valuation of about $9 billion, according to a January report by Bloomberg News. The company stated in its initial filing in September of last year that it intended to raise $1 billion through the sale of both new and existing investor shares totaling 84.3 billion rupees.
SoftBank's spokesman did not immediately respond to a request for comment. Oyo stated that it was confident that its valuation shouldn't have been reduced given its improving business performance but added that the timing of an IPO hadn't been determined.
“We are confident that the above speculations about valuation markdown is patently incorrect. Valuation is an outcome of business performance," the startup said in a statement. “We have not decided the exact timing for the IPO and the IPO valuation is also highly speculative."
Oyo’s latest filing states that 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.
But investors worldwide have sold down stocks this year as macroeconomic risks mounted, ascribing lower valuation multiples to tech companies.
With comparisons to his backing of WeWork and its eccentric founder Adam Neumann, the company has been one of SoftBank founder Masayoshi Son's more contentious startup bets. Ritesh Agarwal, the founder of Oyo, has been urged to rapidly expand in markets like Japan and the US by Son, with disastrous results.
Each quarter, SoftBank makes an estimate of the value of its holdings and records any changes as a profit or loss on its income statement. In the June quarter, it reported a record loss of $23.4 billion due to falling portfolio valuations and foreign exchange losses.
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