According to sources, hospitality company OYO is reportedly planning to reduce the size of its proposed initial public offering (IPO) by selling only a third of the originally planned shares due to market volatility and plunging valuations of tech companies. This reduction in shares could impact the amount of fresh capital that OYO is expected to raise. The company is expected to file its draft red herring proposal (DRHP) as soon as this week, but its current investors are unlikely to offload their shares in the IPO. OYO has declined to comment on the development, but reducing the IPO could be a way to reassure nervous investors that the company could still have a successful listing at its previous valuation. However, there is a complication related to OYO’s co-founder Ritesh Agarwal’s $2 billion personal loan from Japanese investors in 2019. While Agarwal is not legally obligated to disclose personal debts in the DRHP, he has reportedly been advised that market regulator SEBI may view it as an investor risk, which could lead to delays or even rejection of the IPO bid.
According to the report, the debt taken on by cofounder Agarwal has added to the urgency felt by the startup’s board, which is dominated by Agarwal and investor SoftBank, to move forward with the IPO. The pandemic has also caused challenges for OYO, with national lockdowns leading to a decrease in bookings while costs continued to rise. However, the company has seen a rebound in travel and holiday demand since the reopening of hotels, providing some relief.