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SoftBank slashes valuation of OYO by 20% to $2.7 billion

The Financial Express logo The Financial Express 2 days ago FE Bureau
While SoftBank couldn't be reached for a comment, OYO rejected the markdown, terming it “patently incorrect”. © Provided by The Financial Express While SoftBank couldn't be reached for a comment, OYO rejected the markdown, terming it “patently incorrect”.

Japan’s SoftBank has cut the valuation of OYO Hotels on its books by more than 20%, Bloomberg reported on Thursday, citing sources. The downgrade comes at a time when the hotel aggregator is once again preparing for an initial public offering (IPO) early next year.

The Japanese investor, the largest shareholder in OYO, cut its estimated value for the firm to $2.7 billion in the June quarter from an earlier $3.4 billion after benchmarking it against peers with similar operations, the report said. OYO’s valuation had reached $10 billion in a 2019 funding round.

While SoftBank couldn’t be reached for a comment, OYO rejected the markdown, terming it “patently incorrect”. Explaining why there was no basis for a markdown, OYO said: “Confident that speculations about the valuation markdown is patently incorrect. Valuation is an outcome of business performance. As per our latest audited results, we have clocked Rs 7 crore maiden adjusted Ebitda profit in the June quarter, at 41% gross profit margin and a 45% increase in gross booking value per hotel per month vs the last financial year. These are the dramatically improved results and the strong performance trajectory is expected to continue.”

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On speculations that it is targeting an early 2023 IPO at a $5-billion valuation, OYO said, “We have not decided the exact timing for the IPO and the IPO valuation is also highly speculative.”

On September 19, OYO filed its earnings for FY22 and the April-June quarter of the current fiscal as addendum to its draft red herring prospectus filed earlier with the Securities and Exchange Board of India (Sebi). The hotel aggregator’s revenue from operations during the April-June period stood at Rs 1,459.3 crore, while losses were at Rs 414 crore. In FY22, with the lifting of Covid-led restrictions, its revenue from operations went up 20.7% to Rs 4,781.4 crore and losses narrowed to Rs 2,140 crore from Rs 4,103 crore in FY21.

OYO is still far behind its pre-Covid annual revenue of Rs 13,413 crore in FY20. It had registered a net loss of Rs 10,419 crore during that year.

Its total costs went up to Rs 6,984 crore in FY22 from Rs 6,937 crore in FY21. General administrative expenses at Rs 515.4 crore were down 44.4% from Rs 927 crore in FY21. The employee expenses, net of ESOP-based compensation reduced by 26.5% in FY22 to `1,117.2 crore.

Helped by travel resumption, the hospitality firm’s gross bookings value per hotel in Q1FY23 stood at Rs 3.25 lakh. During FY22, it was at Rs 2.21 lakh. Its storefronts during the April-June quarter was at 168,000 from 157,000 at the end of FY21.

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