Oravel Stays, the parent company of OYO, has reduced its planned fresh IPO issue to ₹3,350 crore from ₹6,650 crore. This move follows improved cash flows and a strategy to repay debt using internal earnings. Alongside this, Moody’s has upgraded its outlook on the firm, citing expectations for stronger earnings as the company expands its network.
Oravel Stays, the parent company of OYO, is significantly revising its initial public offering (IPO) plans. The company now intends to raise ₹3,350 crore through a fresh issue of shares, nearly halving its original plan of ₹6,650 crore. This strategic adjustment follows signs of improving financial health at the travel-tech firm, which is preparing for its public market debut.
Why the IPO Size is Shrinking
For investors, the reduction in the fresh issue size is a signal of the company's changing financial position. Under the initial proposal, a large portion of the proceeds was meant to pay off existing debt. However, OYO has reported improved cash flows, which the management now expects to use for debt repayment over the next three years. By relying on internal earnings rather than fresh equity, the company is aiming to reduce share dilution, which is generally a positive development for existing stakeholders.
Moody’s Outlook and Growth Projections
The financial shift has also caught the attention of credit rating agencies. Moody’s Ratings recently updated its outlook on the company to positive while maintaining its B2 corporate family rating. The agency expects the company’s EBITDA, or operating profit, to reach approximately ₹3,000 crore over the next 12 to 18 months. This projection is tied to the firm's aggressive strategy to grow its network of storefronts. This update marks a change from a period of high cash burn, reflecting improved operational efficiency compared to previous years.
Ownership and Path Ahead
The company, founded in 2013 by Ritesh Agarwal, maintains significant backing from institutional investors. Ritesh Agarwal holds a 30.52 percent stake, while SoftBank Group Corp’s subsidiary, SVF India Holdings, remains the largest shareholder with a 40.04 percent stake. Having already submitted its Updated Draft Red Herring Prospectus, the firm is moving ahead with its public listing process.
Investor Monitorables
While the reduced issue size and improved cash flow outlook suggest a move toward stability, investors should watch several key factors. The primary monitorable will be the company's ability to sustain its profit margins as it scales its network. The travel-tech sector is highly competitive, and the company’s performance will depend on maintaining steady demand across its platform. Additionally, the success of the listing will depend on how the market perceives its valuation, especially given the historical context of high operational costs in the hospitality-tech space.