Now, let’s revisit the Oyo saga.

In July 2019, Ritesh Agarwal, the 25-year-old founder of Oyo Hotels, spearheaded a $2 billion share buyback at a staggering $10 billion valuation. Styled in the likeness of Adam Neumann's WeWork, Oyo's model hinged on filling rooms that it had acquired through long-term contracts with the hotel owners. Agarwal managed to secure $2 billion in credit for the buyback, puzzling financial pundits as to how the founder could cough up such a large amount of money. The answer lay in SoftBank’s Masayoshi Son, who personally guaranteed the $2 billion loans that Agarwal had procured from financial institutions, including Mizuho Financial Group Inc, to acquire a stake in his own company. This move by Son came amid the exit of Sequoia and Lightspeed Ventures. Incidentally, Mizuho Financial Group is one of the four lead underwriters for the Arm offering.

In September 2021, Oyo filed its draft prospectus aimed at raising over a billion dollars, valuing the company at over $11 billion. However, the float got stalled as SEBI raised some queries in the prospectus even as the markets turned volatile. Early this year, the company pre-filed DRHP for an issue size of around $400-600 million. The details of the filings are not public as pre-filing is done under a confidentiality clause since the interactions are limited with qualified institutional buyers for the marketing of the IPO.

As per the previous DRHP, of the total 33.15% that Agarwal owns in Oyo, a chunk (24.94%) is held through RA Hospitality Holdings (Cayman) at ₹101.23 a share, while the balance of 8.21% is the only tranche of holding that came cheap at ₹0.01 per share. The reason for Agarwal’s high cost of acquisition is because of the 2019 transaction, which was financed by global banks. RA Hospitality Holdings bought back 655 equity shares from Lightspeed Venture Partners at ₹50,65,152 a share and 257 equity shares from Sequoia Capital at ₹43,54,962.93 a share, besides 13,169 shares via a private placement in the same year at ₹37,53,444.31 a share. The following year, RA Hospitality also bought back 75 shares from Anuj Tejpal— the global chief commercial officer at Oyo and one of the founding members—at ₹37,53,444.31 a share, besides buying 388 shares from the Oravel Employee Welfare Trust at ₹38,11,076.22 a share.

Oyo has reportedly posted revenues of over ₹5,000 crore and an EBITDA of around ₹245 crore in FY23, its first pre-tax profit since its inception in 2013.

Paytm, PolicyBazaar, and Delhivery are among the prominent Indian startups backed by Vision Fund. SoftBank Group has posted a net loss of $3.3 billion in the first quarter of FY24 for the third straight quarter, amid unrealised losses in some of its marquee portfolio companies, including Alibaba of China. If the Arm IPO fails, it could potentially unsettle Son’s empire. On the flip side, successful IPOs of both Arm and Oyo could secure the 66-year-old’s reputation as a visionary.

Mizuho Financial

SoftBank's Masayoshi Son does an Oyo with Arm