Oyo in Advanced Talks to Raise Rs 1,000 Crore, Eyes Significant Growth and Expansion

Hospitality startup Oyo is on the verge of securing around Rs 1,000 crore ($120 million) in debt funding from the family offices of top Indian corporate executives and stock market experts, according to sources familiar with the development. The fundraising is part of a broader Rs 1,500 crore ($180 million) debt round, with Oyo anticipating the remaining Rs 500 crore ($60 million) shortly.

Key Backers and Strategic Investments

Notable backers include corporate strategy advisor Anand Jain, Mankind Pharma promoters Ramesh and Rajeev Juneja, and Utpal Sheth, a close aide of the late market maven Rakesh Jhunjhunwala. The involvement of these family offices underscores their emerging role as significant capital sources for new-age companies. 

Upcoming Extraordinary General Meeting (EGM)

Oyo has scheduled an extraordinary general meeting (EGM) on Tuesday to approve the fundraise following an increase in its authorised share capital. The new funding round is expected to value Oyo, backed by SoftBank Group, at approximately $2.5 billion—a notable reduction from its peak valuation of $9 billion in 2021, marking this as a significant down round.

Negotiations with Khazanah Nasional

In addition to the family offices, Oyo is finalising negotiations with Malaysian sovereign wealth fund Khazanah Nasional. The fund is currently negotiating specific rights before finalising its investment. Sources indicate that Oyo founder and CEO, Ritesh Agarwal, may raise up to Rs 250-300 crore from Khazanah, with the remainder coming from domestic investors.

Fund Allocation and Strategic Planning

Incred Wealth is assisting Oyo in pitching the fundraise to high-net-worth individuals, creating a special purpose vehicle to issue shares in Oyo’s parent company to participating family offices. The startup plans to initially approve a fundraise of around Rs 500 crore at the EGM, with the total funding expected to close by the end of the month.

Recent Business Developments and Financial Performance

Oyo has been actively engaging with potential investors through webinars and one-on-one calls, where CEO Ritesh Agarwal has outlined the company’s plans and performance. In 2022, Oyo's largest investor, SoftBank, reduced its valuation to $2.7 billion from $3.4 billion.

Oyo recently announced its first annual net profit of Rs 100 crore for FY24. The company projects a gross booking value of $1.8 billion for FY25, an increase from $1.2 billion in FY24. For FY25, Oyo forecasts revenue of $957 million, up from $657 million in FY24. These figures, however, are unaudited and yet to be filed with the Registrar of Companies.

Market Position and Future Prospects

Despite being heavily impacted by the pandemic, Oyo has restructured and recovered demand. In India, it primarily offers hotel aggregation services, while in Europe, it focuses on home rentals following the acquisition of Amsterdam-based Leisure Group in 2019. Oyo operates 95% of its storefronts in core growth markets such as India, Europe, Malaysia, and Indonesia.

Looking ahead, Oyo aims to service over $300 million in debt by next year and expects to clock $406 million in adjusted gross profit for FY25, with adjusted EBITDA estimated at $181 million. The company has significantly reduced expenses, including an 82% cut in employee benefit expenses and a 60% reduction in marketing and promotions.

The upcoming funding and strategic investments are poised to bolster Oyo’s financial position, enabling it to maintain its growth trajectory and expand its market presence. As Oyo prepares for its potential IPO, the investment from family offices and Khazanah Nasional will play a crucial role in shaping its future.