Oyo Hotels, one of India's largest hospitality startups, is expediting its long-awaited initial public offering (IPO) as founder Ritesh Agarwal faces mounting pressure to repay a significant debt obligation by the end of the year.
According to sources familiar with the matter, creditors, including Mizuho Financial Group Inc., have set a deadline for Agarwal to settle his outstanding dues of $383 million—a crucial part of a multibillion-dollar loan package taken in 2019. If Oyo fails to go public by October 2024, lenders are demanding full repayment from Agarwal. However, there is a possibility that the repayment could be deferred until 2027, but only if the Oyo IPO takes place this year.
Oyo founder Ritesh Agarwal , now 31 years old, had initially secured a $2.2 billion loan five years ago to strengthen his strategic control over Oyo, backed by a guarantee from SoftBank Group Corp.’s CEO, Masayoshi Son. Despite a loan restructuring in 2022, Agarwal has yet to pay back the first tranche of the debt, sources added.
Once considered SoftBank’s biggest Indian investment, Oyo has struggled with its stock market debut due to setbacks caused by the COVID-19 pandemic, which severely impacted its growth trajectory. The company is now reviving discussions with investment bankers, aiming for a potential valuation of up to $5 billion upon listing.
SoftBank remains Oyo’s largest shareholder, holding a 40% stake, while Agarwal owns more than 30%. His previous attempts to list the company fell through due to financial instability and global economic disruptions.
In response to inquiries about the IPO, Agarwal’s family office stated that the company’s listing plan, “whenever it’s decided, would consider its strong net profits” recorded for the fiscal year ending March 2024, along with an expected strong performance in 2025.
However, addressing speculation around Oyo’s financing, the family office dismissed reports about loan restructuring and valuation estimates as “completely incorrect and just speculation or rumor-mongering.” It further claimed that the estimated $5 billion valuation is "separated from reality and lower than the secondary transactions that we are aware of."
Neither SoftBank nor Mizuho representatives have responded to requests for comments regarding the situation.
Founded in 2013, Oyo was initially positioned as India’s answer to Airbnb, catering to price-sensitive travelers with budget accommodations. Agarwal’s early success attracted Masayoshi Son’s backing, which fueled Oyo’s aggressive expansion into international markets, including Japan and the United States. However, this rapid growth strategy backfired, leading to huge financial losses and operational challenges.
The COVID-19 pandemic further devastated Oyo’s business, which relied heavily on budget hotel stays. The company's financial struggles, coupled with legal disputes and investor scrutiny, mirrored the broader decline of India's venture capital-fueled startup boom, where many companies shifted focus from hypergrowth to profitability.
Despite its struggles, Oyo has shown signs of gradual recovery post-pandemic. The company reported a small profit for the fiscal year ending March 2024, signaling improved financial stability.
In a bid to strengthen Oyo’s financial standing, Agarwal infused Rs 830 crore ($95 million) into the company in late 2023 through his Singapore-based investment firm. This move was seen as an effort to boost investor confidence ahead of the IPO and address liquidity concerns.
With a looming $383 million debt repayment and pressure from creditors, Oyo’s IPO has become a time-sensitive necessity for Ritesh Agarwal. While the startup has made progress in financial recovery and profitability, questions remain about whether it can meet investor expectations and achieve the $5 billion valuation target. The upcoming IPO discussions will be crucial in determining Oyo’s future in the hospitality industry and Agarwal’s control over the company he built from scratch.