Oyo likely to raise $200 million at 2x valuation of $4.5-5 billion

Fundraise to help it take over budget hotel chain Motel 6

This report has been updated

Oravel Stays, the parent company of travel tech giant Oyo, is in preliminary talks to secure $200 million in a primary funding round, aiming to fuel its acquisition of G6 Hospitality, the owner of Motel 6, a well-known budget hotel chain in the US.

The SoftBank-backed company is seeking to close the funding at a valuation between $4.5 billion and $5 billion, much above its last valuation of $2.4 billion but still far from the peak of $10 billion.

The company is engaging with offshore institutional investors and private Indian investors to raise fresh funds.  This round comes on the heels of a $175 million financing led by Oyo’s founder, with participation from various family offices and private investors.

The private investors include InCred Wealth, J&A Partners, the Mankind Pharma family office, and ASK Financial Holdings, which had pegged the company at $2.4 billion.

“OYO is targeting a valuation of $5 billion in this funding round, reflecting OYO’s projected Ebitda (earnings before interest, taxes, depreciation, and amortisation) of Rs 2,000 crore in FY26 after the G6 deal. OYO’s shares have already had a few secondary transactions at this level in some deals, indicating investor confidence in the company's growth prospects,” said a source aware of the development.

Simultaneously, OYO is working to refinance $450 million of its outstanding debt, securing more favourable terms. The new arrangement is expected to lower the interest rate from 14 per cent to 10–10.5 per cent, while extending the loan maturity by three years to FY29.

Additionally, the company is adding a $350 million drawable bridge facility as a precautionary measure to provide interim funding until the equity raise concludes. “The $350 million (bridge component) is a contingency plan and may not be drawn,” the source explained.

The company declined to comment on an e-mail sent by Business Standard on the development.

The acquisition of G6, valued at $525 million in an all-cash deal, would give OYO control over Motel 6’s expansive network of more than 1,500 franchise hotels across the US and Canada.

According to sources, the refinancing discussions started following an upgrade in OYO’s credit rating. Fitch Ratings in its last update affirmed OYO’s long-term Foreign and local currency issuer default ratings at 'B' with a stable outlook. It maintained a ‘B’ rating for the company’s $660 million senior secured term loan facility.

OYO has reported a profit after tax (PAT) of Rs 132 crore for Q1FY25, marking a sharp turnaround from a loss of Rs 108 crore in the year-ago period. Founder Ritesh Agarwal disclosed in a recent town hall that OYO expects its PAT to increase threefold, reaching Rs 700 crore by the end of FY25.

With its business performance on an upswing, OYO joins a cohort of Indian unicorns successfully raising substantial capital in recent months. In the quick-commerce sector, Zepto raised close to $1 billion over the past year, pushing its valuation to $5 billion, while food delivery and quick-commerce player. Swiggy to raise a total of Rs 11,600 crore.