Softbank-endorsed OYO is poised to resubmit its long-anticipated IPO, as the global travel technology entity nears the culmination of its refinancing endeavors to amass up to USD 450 million through the disposition of dollar bonds, insiders revealed.
JP Morgan is anticipated to spearhead the refinancing via the issuance of dollar bonds, with an expected annual interest rate of 9 to 10 percent, according to a knowledgeable source.
In anticipation of this refinancing, OYO has already petitioned the market regulator SEBI to retract its current draft red herring prospectus (DRHP). The company plans to resubmit a revised version of the DRHP subsequent to the bond issuance.
Oravel Stays Ltd, the progenitor of OYO, had in November preemptively settled a substantial portion of its debt amounting to Rs 1,620 crore through a repurchase scheme. This buyback process involved reacquiring 30 percent of its outstanding Term Loan B valued at USD 660 million, thereby reducing its remaining loan balance to approximately USD 450 million.
A source intricately involved in the company’s IPO strategies informed PTI, “The refinancing will necessitate significant amendments to OYO’s financial statements. Hence, under extant regulations, it will be imperative to revise its filings with the regulator.”
“Given that the refinancing decision is at an advanced juncture, it’s judicious to withdraw the current IPO application,” he added.
The refinancing will extend the repayment tenure to five years, in contrast to the repayment of the residual Term Loan B due in 2026, the source indicated.
The bond issuance is projected to considerably diminish the prevailing effective interest rate of 14 percent on its existing USD 450 million Term Loan B facility.
“The refinancing is forecasted to yield annual interest savings of USD 8-10 million (Rs 66.4-83 crore) in the inaugural year, after accounting for the issuance costs. The company foresees annual savings of USD 15-17 million (Rs 124.5 -141.1 crore) thereafter, with almost all savings augmenting its net profits. Post the debt refinancing, the company is contemplating an equity round to bolster investor confidence ahead of a public listing, fortifying its financial robustness,” the source elaborated.
In September 2021, OYO had submitted preliminary documents with the Securities and Exchange Board of India (SEBI) for a Rs 8,430 crore IPO. The IPO launch was deferred due to the then volatile market conditions, prompting the company to prepare for a lower valuation around USD 4-6 billion, as opposed to the initially targeted USD 11 billion.
