Oyo's Valuation Falls After Largest Investor Softbank's Markdown

In what can be seen as a major setback for?IPO-bound OYO, the company’s largest investor, Softbank, has cut its valuation by 20%. The valuation of OYO in the private market has dipped to around $6.5 billion following reports of a markdown of the hospitality and travel-tech firm's?valuation?by Japanese multinational conglomerate SoftBank in its private books.

Last week, i.e., in the week ended September 30, 2022, nearly 12.3 lakh shares of the company were sold in the private market as compared to over 1.6 lakh shares sold in the previous week, indicating that?Oyo’s share sell off last week was nearly 12 times higher than those of the previous week.?

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The sell-off followed reports that its largest investor, SoftBank, had cut the valuation?of the hospitality platform by 20% in its books, said a source, as per the PTI report.

When?OYO?updated its financials in its draft prospectus last month, reporting positive EBIDTA (earnings before interest, taxes, depreciation, and amortization) besides the narrowing of losses, the company's share price in the private market had risen to Rs 94 per share.

However, in the subsequent days following reports of the cut in valuation by SoftBank, the company's valuation dipped by nearly 13% to Rs 81 per share, the report mentioned.

Last month, in a regulatory filing, OYO had reported a revenue of Rs 1,459.32 crore in the three-month period ended June 30, 2022.

The company, which had last year in October filed preliminary papers with market regulator SEBI to raise Rs 8,430 crore through an initial share-sale, also posted an "adjusted EBITDA" of Rs 7.27 crore in the quarter ended June 30, 2022, improving from an adjusted EBITDA loss of Rs 471.72 crore in FY22.

When it filed the draft prospectus for its IPO, OYO was looking at a valuation of around $10 billion initially but later on prepared to settle for a lower valuation at around $7-8 billion.?

Also Read:?Upcoming?IPOs?To Look Forward To In 2022-23

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According to the filing, OYO's restated loss for the three-month period ended June 30, 2022 stood at Rs 413.87 crore. In the fiscal ended March 31, 2022, it had posted a loss of Rs 1,939.8 crore.

Also, as per the report, OYO mentioned that its total number of 'storefronts' was down at 1,68,012 in the quarter ended June 30, 2022 from 1,68,639 as on March 31, 2022 due to a decrease in the number of hotels to 12,668, sequentially down from 17,994 in the fiscal ended March 31, 2022.

Now it remains to be seen if and how this valuation markdown by?Softbank?impacts Oyo’s IPO plans, especially amidst the turbulent market and economic scenario that has been prevailing, and growing?recession fears.

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