OYO, backed by Softbank, is gearing up to relaunch its highly anticipated IPO, with plans to raise up to USD 450 million through the sale of dollar bonds as part of its refinancing strategy. Sources close to the matter revealed that JP Morgan is likely to spearhead the refinancing effort, aiming to secure funds at an estimated interest rate of 9 to 10 per cent per annum.
To facilitate this refinancing, OYO has taken steps to withdraw its current draft red herring prospectus (DRHP) application with markets regulator SEBI and intends to submit an updated version post the bond issuance.
Previously, in November, Oravel Stays Ltd, OYO’s parent company, took a significant stride towards debt reduction by prepaying a substantial portion of its debt, totaling Rs 1,620 crore, through a buyback process. This move resulted in a reduction of its outstanding loan to approximately USD 450 million.
A source intimately involved in OYO’s IPO plans explained, “The refinancing process will necessitate significant changes to OYO’s financial outlook, mandating a revision of filings with the regulator as per existing regulations. With the refinancing nearing finalization, it’s pragmatic to withdraw the current IPO application, given the evolving financial landscape.”
The refinancing initiative extends OYO’s repayment timeline to five years, deviating from the previous repayment schedule, which had the remaining Term Loan B due in 2026.
Furthermore, the bond issuance is expected to substantially reduce the effective interest rate on OYO’s existing USD 450 million Term Loan B (TLB) facility from 14 per cent to a more competitive rate.
Elaborating on the financial implications, the source noted, “The refinancing is poised to yield significant interest savings of USD 8-10 million (Rs 66.4-83 crore) in the first year, offsetting the costs associated with bond issuance. Subsequently, annual savings of USD 15-17 million (Rs 124.5-141.1 crore) are anticipated, bolstering net profits. Following the debt refinancing, OYO is open to considering an equity round to reinforce investor confidence before proceeding with a public listing, thereby bolstering its financial position.”
In September 2021, OYO had initially filed preliminary documents with the Securities and Exchange Board of India (SEBI) for an IPO valued at Rs 8,430 crore. However, due to market volatility at the time, the IPO launch was delayed, prompting the company to recalibrate its valuation expectations to a range between USD 4-6 billion, compared to the initial target of USD 11 billion.
