Oyo Hotels, the Indian hospitality startup, is reportedly engaged in discussions with Apollo Global Management Inc to refinance a $660 million loan, citing the need for additional time to reduce its debt obligations due to a delay in its initial public offering (IPO). This development comes in the wake of Oyo’s recent announcement of its first-ever annual profit, while Fitch Ratings anticipates improved earnings for the company.
Oyo Hotels, the prominent Indian lodging-booking company, is exploring options for refinancing its $660 million loan with Apollo Global Management Inc. The move seeks to provide Oyo with the flexibility to manage its debt obligations more effectively, primarily in response to a delay in its planned initial public offering (IPO). The refinancing discussions are taking place under the umbrella of Oravel Stays Pvt, Oyo’s parent company, which is now seeking to extend the loan’s maturity from its current deadline in 2026 to a five-year term.
While the final decision on the refinancing terms remains pending, sources familiar with the matter suggest that a resolution could be reached as early as the coming month. This strategic financial move follows Oyo’s milestone achievement of reporting its first-ever annual profit and coincides with Fitch Ratings’ positive outlook on the company’s future earnings, driven by the gradual recovery of the travel industry.
Oyo’s pursuit of refinancing with Apollo comes after the startup’s history-making performance, as it became the first Indian unicorn to secure debt from foreign institutions. At the time of securing the loan, Oyo offered favorable terms and maintenance covenants—a customary practice for firms perceived as high-risk by investors. However, with a notable uptick in profitability, the company has been approached for more attractive financing options, although no definitive decisions have been made, including the partial prepayment of the loan, according to an Oyo spokesperson.
A representative for Apollo has refrained from commenting on the ongoing negotiations, indicating the sensitivity of the matter.
Despite the progress in Oyo’s financial stability and the success of reporting its first annual profit, the startup’s path to its much-anticipated IPO has been fraught with delays. The funds raised from the IPO had been intended to help Oyo reduce its debt load; however, the extended wait has led the company to explore alternative financing avenues. Oyo’s founder, Ritesh Agarwal, has been actively pursuing an IPO for the startup for several years, with SoftBank Group Corp. holding a 47% stake in the company, and Airbnb Inc. among its notable backers.
Earlier this year, Oyo had revealed its renewed commitment to going public by filing fresh IPO documents on April 1, 2023. However, the company did not disclose the specific fundraising target, the names of advisory firms involved, or other financial details related to the offering.
Oyo’s journey from being valued at approximately $10 billion to its pursuit of becoming India’s answer to Airbnb has been marked by ambition, resilience, and adaptability. Its initial attempt to go public in 2021 was set to raise 84.3 billion rupees ($1 billion) before being shelved due to the volatile landscape of technology valuations that impacted startups worldwide.
As Oyo navigates its course towards a successful IPO and manages its financial obligations, the refinancing discussions with Apollo Global Management provide the startup with the flexibility required to continue its mission of revolutionizing the Indian hospitality industry while building a strong financial foundation for the future.
In conclusion, Oyo’s pursuit of refinancing its $660 million loan with Apollo Global Management reflects its commitment to securing a solid financial footing amidst the challenges posed by delayed IPO plans. With a history of pioneering change in the Indian hospitality sector, Oyo remains focused on its vision for growth and expansion, driven by its resilient founder and the support of influential backers like SoftBank and Airbnb.
