OYO files DRHP to raise ₹534 crore amid accumulated losses
Oravel Stays Limited (OYO) filed its DRHP for an IPO to raise ₹534 crore, earmarked for debt repayment and expansion. The hospitality tech firm reported a net loss of ₹39,438.44 Mn in FY2021 as revenue dropped 69.92% to ₹39,616.49 Mn due to the pandemic. Despite improving contribution margins, the company faces risks from accumulated losses and equity erosion.
*this image is generated using AI for illustrative purposes only.
Oravel Stays Limited (OYO) filed its Draft Red Herring Prospectus (DRHP) with market regulators to raise ₹534 crore through an Initial Public Offering (IPO). The global hospitality technology platform, which operates 157,344 storefronts across 35+ countries, aims to utilize the net proceeds for prepayment of borrowings and funding growth initiatives. Despite its large scale, the company has reported net losses in every year since its incorporation, recording a loss of ₹39,438.44 Mn in FY2021.
Financial Performance
The company's financial results reflect the severe impact of the COVID-19 pandemic on the travel and hospitality sector. Revenue from operations declined by 69.92% in FY2021 to ₹39,616.49 Mn, down from ₹131,681.52 Mn in FY2020. Total expenses for FY2021 stood at ₹69,360.75 Mn, resulting in a Profit Before Tax (PBT) of -₹40,347.20 Mn. The company has consistently reported negative operating cash flows, which stood at -₹24,326.33 Mn in FY2021.
| Metric (₹ Mn) | FY2019 | FY2020 | FY2021 |
|---|---|---|---|
| Revenue from Operations | 63,297.36 | 1,31,681.52 | 39,616.49 |
| Total Expenses | 88,094.28 | 2,28,001.20 | 69,360.75 |
| Net Profit / (Loss) | -23,645.32 | -1,31,227.77 | -39,438.44 |
| Total Equity | 86,969.21 | 64,567.03 | 27,441.43 |
Objects of the Issue
OYO plans to deploy the funds raised through the IPO towards specific corporate objectives. The offer comprises a fresh issue, though the price band and issue size details were not available in the DRHP. The allocation of the specified proceeds includes ₹244 crore for the prepayment or repayment of certain borrowings availed by subsidiaries and ₹290 crore for funding organic and inorganic growth initiatives.
| Purpose | Amount (₹ Crore) |
|---|---|
| Repayment of Subsidiary Borrowings | ₹244 Cr |
| Growth Initiatives | ₹290 Cr |
| Total Specified Amount | ₹534 Cr |
Operational Metrics and Risks
The company operates an asset-light model, with 99.9% of storefronts having no fixed payout commitments as of 31-Mar-2021. Its Direct-to-Consumer (D2C) channel contributed 71.2% of global demand in FY2021. OYO highlighted an improvement in unit economics, with Contribution Profit rising from 5.1% in FY2020 to 18.4% in FY2021. However, the DRHP flags significant risks, including the company's history of net losses and the uncertainty regarding future profitability. Total equity has eroded from ₹86,969.21 Mn in FY2019 to ₹27,441.43 Mn in FY2021 due to accumulated losses.
How will OYO address investor concerns regarding its history of consistent net losses and negative operating cash flows?
What specific growth initiatives does OYO plan to prioritize with the ₹290 crore allocated for organic and inorganic expansion?
How might the repayment of subsidiary borrowings impact OYO's financial stability and future borrowing capacity?
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