OYO could potentially secure funding from private investors with a valuation of around $4 billion, according to a source.

In a recent townhall meeting, OYO founder Ritesh Agarwal shared some exciting news with employees. Private investors have approached the travel tech platform, and there's a possibility of raising equity at a valuation of up to $4 billion. This is great news for the company, which is preparing for its initial public offering (IPO), and has already achieved its first profitable year. In the 2023-24 financial year, OYO recorded a profit after tax of Rs 99.6 crore and an adjusted EBITDA of Rs 888 crore, up from Rs 274 crore in the previous fiscal year.

During the townhall, a presentation was shared which revealed that Oravel Stays Ltd, the operator of OYO, will be refiling its IPO documents with the Securities and Exchange Board of India. This is due to the recent refinancing of its $450 million Term Loan B at a lower interest rate. According to sources, the company may also consider a small equity round at a valuation of $3-4 billion, or Rs 38-45 per share, to further reduce its debt. This is in line with OYO's goal of improving its financials and preparing for a successful IPO.

The fiscal year 2023-24 was a big year for OYO, as it added 5,000 hotels and 6,000 homes to its global portfolio. The company's gross booking value per storefront per month for hotels also saw a significant increase, reaching around Rs 3.32 lakh. This was accompanied by improved gross margins, which rose from Rs 2,350 crore in FY23 to Rs 2,508 crore in FY24. Additionally, operating costs decreased from 19% to 14% of gross booking value, indicating improved efficiency within the company.

Agarwal attributed this profitability to OYO's focus on operational performance, stable gross margins, cost efficiencies, and a reduction in interest costs. In fact, in the third quarter of FY24, the company was able to reduce its debt by $195 million through a buyback process, resulting in lower interest costs. Moving forward, OYO hopes to continue its growth trajectory by increasing revenues and gross booking value while maintaining its profitability.

In the townhall, Agarwal also mentioned the recent debt buyback of $195 million, which involved repurchasing 30% of the company's outstanding Term Loan B due in 2026. This process will not only lead to annual savings of Rs 124-141 crore but also extend the repayment date to 2029. With this successful refinancing, OYO's interest rates will be reduced from 14% to 10%, resulting in significant cost savings for the company. Agarwal also hinted at the possibility of further debt buybacks using the cash flow generated by the company.

Overall, OYO's future looks bright as it continues to attract private investors, improve its financials, and expand its global reach. With the support of its employees and investors, the company is confident in its ability to achieve its goals and maintain its position as a leading travel tech platform.

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