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OYO Withdraws DRHP, Plans to Refile IPO Following $450 Million Refinancing

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OYO, the global travel technology giant backed by SoftBank, has withdrawn its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) and plans to refile it after finalizing a significant refinancing initiative. Sources reveal that the company is set to raise up to $450 million through the sale of dollar bonds to streamline its debt structure.

JP Morgan is expected to lead the refinancing process, which will involve the issuance of dollar bonds at an estimated annual interest rate of 9 to 10 percent. This move comes as OYO aims to enhance its financial health ahead of its much-anticipated initial public offering (IPO).

In preparation for the refinancing, OYO has submitted an application to SEBI to withdraw its existing DRHP. An updated DRHP will be filed post the bond issuance. The parent company, Oravel Stays Ltd, had earlier in November prepaid a substantial portion of its debt, amounting to Rs 1,620 crore, by repurchasing 30 percent of its outstanding Term Loan B (TLB) of $660 million. This reduced its outstanding loan amount to approximately $450 million.

A source closely involved in the IPO plans commented, “The refinancing will result in significant changes to OYO’s financial statements. Therefore, according to current regulations, it is necessary to revise the filings with the regulator. With the refinancing decision at an advanced stage, it’s more logical to withdraw the current application and refile with updated financials.”

The refinancing will extend the repayment timeline to five years, compared to the existing repayment schedule of the remaining TLB due in 2026. This strategic move is expected to lower the effective interest rate from 14 percent to a more manageable level. The anticipated interest savings are substantial, with the company projecting annual savings of $8-10 million (Rs 66.4-83 crore) in the first year alone, and $15-17 million (Rs 124.5-141.1 crore) thereafter. These savings will significantly enhance OYO’s net profits.

Following the debt refinancing, OYO is also open to considering an equity round to bolster investor confidence and further fortify its financial position before the public listing.

In September 2021, OYO had initially filed for a Rs 8,430 crore IPO with SEBI. However, due to volatile market conditions, the launch was delayed, prompting the company to reconsider its valuation. Originally targeting an $11 billion valuation, OYO is now preparing for a potential valuation in the range of $4-6 billion.