OYO will refile IPO after refinancing and remove DRHP: Sources

OYO has already submitted an application to markets regulator SEBI to withdraw its existing draft red herring prospectus (DRHP) in advance of the refinancing.

Following the bond offering, the business plans to refile an amended version of the DRHP.

May 18, New Delhi According to insiders, OYO, a major participant in the travel technology industry, is close to finalizing its refinancing plans to raise up to $450 million via the issue of dollar bonds. Softbank is backing OYO in this much-awaited IPO. According to a source, JP Morgan is most likely to be the main lender for the refinancing via the selling of dollar bonds at an expected interest rate of 9 to 10% annually.

OYO has already submitted an application to markets regulator SEBI to withdraw its existing draft red herring prospectus (DRHP) in advance of the refinancing. Following the bond offering, the business plans to refile an amended version of the DRHP. The parent business of OYO, Oravel Stays Ltd., paid off a significant portion of its debt in November via a repurchase procedure, totaling Rs. 1,620 crore. Repurchasing thirty percent of its $660 million outstanding Term Loan B was part of the repurchase. Its outstanding loan balance was reduced to around $450 million as a result of the transaction.

"There will be material changes to OYO's financial statements as a result of the refinancing," a person with inside knowledge of the company's IPO prospects told PTI. It will thus need to update its files with the agency in accordance with current requirements. With the existing financials, it doesn't make sense to pursue IPO clearance further since the refinancing decision has advanced. Thus, it seems sense to withdraw the application as it is," he said.

According to the source, the refinancing would lengthen the payback period to five years as opposed to the remaining TLB's 2026 repayment deadline. The present effective interest rate of 14% on its $450 million Term Loan B (TLB) facility would be considerably reduced by the bond offering. After deducting the bond issuing expenses, the refinancing is anticipated to save $8–10 million (about Rs. 66.4–83 crore) in interest during the first year. After that, the business expects to save $15–17 million (about Rs 124.5–141.1 crore) a year, almost all of which would be added to net earnings. After the debt refinancing, the business is willing to consider an equity round in order to reassure investors and strengthen its financial position prior to going public, the person said.

OYO submitted preliminary documentation for an initial public offering (IPO) of Rs 8,430 crore to the Securities and Exchange Board of India (Sebi) in September 2021. Due to the unstable market circumstances at the time, the business had to prepare for a lower value of about $4-6 billion instead of the $11 billion it had originally targeted, delaying the IPO debut.