SoftBank Cuts Oyo Valuation to $2.7 Billion: Report
SoftBank, led by Masayoshi Son, has led Oyo’s internal valuation Ritesh Agarwal, cut down to $2.7 billion from its last reported valuation of nearly $10 billion, TechCrunch reported Thursday. The reported valuation cut comes at a time when where the hotel company is considering its IPO in the coming months.
Citing a source, the report said that SoftBank is the largest investor in Oyo at 45 cents, and its estimate “is a strong signal for the current health of the startup“. Through its Vision Fund investment module, SoftBank is one of the largest investors in India’s startup and consumer internet ecosystem alongside companies such as Sequoia Capital and Tiger Global. In December, speaking at India’s premier global fintech summit, Infinity Forum, Son said, “We’ve invested $3 billion in India this year alone.
We are the country’s biggest foreign investor. We provide approximately 10 per cent of the financing for all unicorns, companies worth $1 billion or more, in India.” He also explained that SoftBank-backed companies had created more than 1 million jobs in India. The statement, according to a corporate spokesman, was “erroneous” and had “any logic” because the business’s profitability must have strengthened.
“The assertion about the rating decline was proven inaccurate, in our opinion. The rating is the outcome of corporate growth. According to our latest audited results, we have posted an Adjusted EBITDA profit of Rs.7 crore in the June quarter with a Gross Profit Margin of 41 per cent and a 45- % increase in gross profit booking value per hotel by per cent per month compared to last fiscal year,” the company spokesman said in a statement.
A downgrading has no justification, the spokeswoman continued. Oyo’s other major investors include Sequoia India and Lightspeed Venture Partners India. The hospitality company has one Application Filed Addendum to its previously filed Red Herring Draft Prospectus (DRHP) filed for its IPO with the Securities and Exchange Board of India (SEBI) in October 2021.
The DRHP addendum sparked a major controversy in India as well.
Former Director of Infosys T.V. Mohandas Pai slammed Oyo for allegedly misleading investors through “mis-accounting” when the hotel company reported its first positive EBITDA in the first quarter of the current fiscal year.
Oyo claimed (restated) EBITDA- Profitability level of Rs 10.6 crore for the June quarter. Abhishek Gupta, Chief Financial Officer (CFO) of Oyo Group, replied to Pai saying that the EBITDA is “clear reported.” “.
“According to the data, EBITDA reached Rs 10.57 crores during the first quarter of FY23, which is higher than Revised EBITDA. Not included in EBITDA and Adjusted EBITDA is another revenue. The entire data set is derived from signed and verified financial statements.
International non-GAAP indicators are clearly specified,” tweeted Gupta.
The company said that its revenue for FY22 was Rs 4,905 crore, a growth of 18% from the Rs 4,157.3 crore reported in FY21.
Oyo halved its sales loss for FY22 to Rs 1,892.2 crore, from Rs 3,382.5 crore in FY21. However, an Oyo spokesman said, “Speculations of a rating downgrade are obviously false.”
When ET contacted SoftBank, he declined an opinion. Oyo was last valued at $9.6 billion when the company raised a strategic investment from Microsoft in September last year. SoftBank will be listed as a sponsor of Oyo an equity stake of more than 46%, according to the draft IPO filings with the Securities and Exchange Board of India (Sebi) last October.
Oyo denied any downgrading of the rating, saying in a statement: “The rating is the result of business performance. Based on our latest audited results, we recorded Rs 7 million in Adjusted Ebitda Opening Profit in the June quarter, with a 41% gross profit margin and a 45% increase in gross booking value per hotel per month compared to the last fiscal year.”
This indicates a significant recovery in business since the outbreak of Covid-19 hit the travel and hospitality sector badly. “There is no reasonable basis for a downgrade”, he added Oyo.
The cited sources said that after receiving approval from Sebi, Oyo could reassess itself with a rating of settle for approximately $5 billion in its IPO. “We still have not determined the precise time of the IPO, and the valuation of the Initial public offering is also quite speculative,” the business representative stated.
ET reported in February that Oyo’s proposed IPO would be reduced from the original plan of raising just over $1 billion. While Oyo initially targeted a valuation above $9-12bn late last year, it had adjusted expectations to around $7bn following the change in market sentiment along with additional scrutiny from New-Age company, ET reported.
Oyo has yet to get the green light from regulators to go public, but the company said Sebi gave it permission to publish updated and audited financial statements by September Quarter and will then begin reviewing your application. Add Zel to SoftBank, the f Oyo’s founder, Ritesh Agarwal, is a promoter of the company with a stake of around 33%.
Both will remain developers after the listing, according to Oyo’s Draft Red Herring Prospectus (DRHP). Lightspeed Venture Partners, Sequoia Capital and Airbnb, among other Oyo investors. Newswire Bloomberg first reported on SoftBank’s re-evaluation of Oyo.
