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The travel technology firm and budget hotel booking platform, OYO, has initiated talks with investment banks such as JP Morgan, Citi and Kotak Mahindra Capital to manage its $1.5 billion public issue, according to a report. The news comes ahead of the company’s proposed plans of a public listing. The firm is expected to file its draft red herring prospectus in the months to come, as it prepares to launch its initial public offering (IPO), according to a report in Business Standard. OYO is expected to raise between $1.2 billion and $1.5 billion through the IPO at a valuation of $14-16 billion.

Raising stakes

Oravel Stays, the parent firm of OYO, at an extraordinary general meeting held on September 1, approved an increase in the authorised share capital of the company, from the existing Rs 1.17 crore to Rs 901 crore.

‘Authorised capital’ is defined as the limit on capital that a company is authorised to issue at any given point in time, which is decided by its shareholders and is prescribed in the memorandum of association document of the company. The decision to increase in authorised capital is taken by a company when it anticipates further requirement of capital or intends to go public and lists its shares on the stock exchanges.

The move by OYO to increase its authorised capital is part of its preparation to gear up for future capital-raise ahead of its IPO, as per the report. In the run-up to the IPO, OYO recently raised $9.6 billion in fresh capital from Microsoft at a post-money valuation.

Reinventing itself

The hospitality major has made many changes to its model over the years to reap rich dividends. For instance, its shift to tech and a software-led operational model, that is an asset- and capital expenditure-light structure has resulted in an increase in profit margins from single digits to nearly 27%.

Then it moved away from the minimum guarantee model to a revenue-sharing model and implemented a twice-a-week dues reconciliation model with its hotel partners. In the first quarter of 2021, the firm announced its India operations had turned EBITDA positive for the quarter.

OYO also changed itself to become a product-tech provider for hotels and homes, by launching a line of products and initiatives. The company has recently launched several services and products like Discover OYO, Sanitised Before Your Eyes, Yo! chatbot, Tariff Manager and VaccinAid among others, to ensure steady cash flows, higher occupancy, revenue and enhanced operations for its partners.

OYO also raised $660 million through the term B loan route from global institutional investors, including Fidelity Investments, becoming the first Indian start-up to do so, added the BS report.

The company also became the first Indian start-up to be rated by international rating agencies —Moody’s and Fitch.