SEBI asks OYO to refile IPO draft papers with changes

In a move that could affect hotel and travel aggregator OYO’s IPO plans, capital markets regulator SEBI has asked Ritesh Agarwal-led company to refile its draft papers with certain changes. The SEBI website shows an update on OYO's DRHP (draft red herring prospectus) on December 30, 2022, asking it to refile the initial papers with applicable updates or revisions. No explanation or reason has been given as to why revisions were sought.

After filing preliminary initial public offering (IPO) papers in 2021, OYO Hotels' parent company Oravel Stays Ltd filed a revised DRHP on September 19, 2022. Aiming towards a public issue this year, the Softbank-backed travel tech firm eyes to raise about ₹8,430 crore via public issue. The proposed offering comprised a fresh issue of shares of up to ₹7,000 crore and an offer for sale worth ₹1,430 crore.

The IPO-bound hotel aggregator reported a net loss of ₹333 crore ($40.77 million) in the second quarter that ended on September 30, 2022. The company posted a loss of ₹414 crore in the first quarter of the current fiscal (Q1 FY23). The revenue in the first half of the current fiscal (H1 FY23) jumped 24% to ₹2,905 crore. 

Notably, the SEBI had given OYO permission to submit updated financials before it examined and processed the company's IPO application last year. In its revised DRHP filed in September 2022, OYO mentioned that it reported a reduction in losses for FY22 and Q1 FY23. 

OYO's FY21 loss stood at ₹4,103 crore, while the loss attributable to equity shareholders as of March 31, 2022, was ₹2,140 crore. The revenue was ₹3,961.6 crore in FY 2021, which increased by 20.7% to ₹4,781.3 crore in fiscal 2022. On the other hand, as of the first quarter ending June 30, 2022, the company's loss stood at ₹414 crore. For the three-month period that ended June 30, 2022, OYO's revenue was ₹1,459.3 crore. 

OYO's expenses for fiscal 2020, fiscal  2021, fiscal 2022 and the three-month period ended June 30, 2022, were ₹22,800 crore, ₹6,937 crore, ₹6,984 crore and ₹1,910 crore, respectively, showing a consistent decline. 

After filing its preliminary offer document in October 2021, the company delayed the public issue in the wake of unfavourable market conditions. OYO proposed to raise about $1.1 billion in 2021, but it shelved the plans to launch the IPO as a majority of new-age tech IPOs failed to impress investors amid the global downturn across markets. 

OYO's early backer SoftBank Group Corp holds a 47% stake in the company, while about one-third of the company is owned by founder Ritesh Agarwal. 

Separately, the Ritesh Agarwal-led company laid off around 600 or 10% of its total 3,700 employees last year. The sacked employees were part of the company's product and engineering teams. The layoffs, however, were seen as a clean-up by OYO to carve a path towards profitability ahead of its IPO and an effort to make operations smoother with its partners.