Oyo will check into public markets in better shape

The logo of OYO, India's largest and fastest-growing hotel chain, installed on a hotel building is seen through wires in an alley in New Delhi
The logo of OYO, India's largest and fastest-growing hotel chain, installed on a hotel building is seen through wires in an alley in New Delhi, India, September 25, 2018. REUTERS/Anushree Fadnavis

MUMBAI, Sept 20 (Reuters Breakingviews) - A recovery in travel means Oyo is set to check into public markets in better shape.

The budget hotel chain founded by Ritesh Agarwal grew revenue 18% to 49 billion rupees ($615 million) in the year to March. Expenses were almost flat even though its debt service costs ballooned 86% after issuing an offshore syndicated loan last year. Crucially, the company's adjusted EBITDA turned positive in the three months to June.

The uplift was reported in an addendum to its draft initial public offering document first filed a year ago. Oyo’s top-line remains more than 60% off its pre-pandemic levels, though the business, which includes operations in Europe and India, has been restructured since then too.

Oyo’s $1 billion offer size, including a sell down by SoftBank’s (9984.T) Vision Fund, remains unchanged, even as valuations of its publicly traded peers have collapsed in the year since the company’s first deal filing. Earlier Oyo was targeting a whopping $11 billion valuation, equivalent to 19 times trailing sales. At the time that was equivalent to average of the multiples of Airbnb (ABNB.O) and TPG-backed Vacasa (VCSA.O). Using the same ratios now, Oyo might be worth $4 billion. If markets cool further, Agarwal may have to revise his cautious optimism downward. (By Una Galani)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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