India's Oyo plans to raise $1.2bn through an IPO

Oyo Hotels and Homes, a once high-flying Indian start-up that ran into troubles during the pandemic, plans to file preliminary documents to go public as soon as next week and will seek at least $1.2 billion, according to people familiar with the matter.

The initial public offering will consist mainly of primary shares, or those sold by the company, as well as a small portion of the secondary stock, said the sources, asking not to be identified as the details are private.

Ritesh Agarwal, the 27-year-old founder and chief executive, does not plan to sell any of his stake, one source said.

Oyo is targeting an offering of about $1.2bn and could increase that, one of the people said. It is pushing to accelerate the initial filing – known as the draft red herring prospectus, or DRHP, in India – to as soon as next week, though it could also happen in early October, the person said. Bloomberg reported in August that Oyo was targeting an October filing.

A successful IPO would mark a dramatic turnaround for Oyo. The hotel-booking start-up, backed by Japan’s SoftBank Group, stumbled in its global expansion and then was hit by the Covid-19 pandemic, which effectively ended travel for months in many countries.

Mr Agarwal led the company through a painful overhaul, pulling back in certain markets, cutting the workforce and slashing compensation. He said in an interview with Bloomberg TV in August that the pandemic hit Oyo like “a cyclone”, with business plummeting sharply.

Mr Agarwal, who has been mentored by SoftBank’s Masayoshi Son, refocused on the technology and services that are most valuable to his hotel partners. The start-up earlier raised $660 million in debt financing to service its existing loans.

The India IPO market is booming this year, on track to hit a record in the amount of fundraising. In one positive sign for start-ups and their backers, the food delivery company Zomato went public in July and saw its shares surge, despite substantial losses.

Mr Agarwal has said that Oyo has made progress in turning around its fortunes in recent months. In September, Microsoft said it would enter a multi-year alliance with Oyo and invest $5m in the company. Oyo’s valuation is about $9bn, according to the market research firm CB Insights.

In his interview with Bloomberg TV, Mr Agarwal declined to comment specifically on IPO plans.