OYO withdraws DRHP, to refile its much-awaited IPO post refinancing

JP Morgan is the likely lead banker for the refinancing through the sale of dollar bonds at an estimated interest rate of 9 to 10% per annum

Softbank-backed OYO is set to refile its much-awaited IPO as the global travel tech player is close to finalising its refinancing plans to raise up to $450 million via sale of dollar bonds, sources said.

JP Morgan is the likely lead banker for the refinancing through the sale of dollar bonds at an estimated interest rate of 9 to 10 per cent per annum, a source said.

In preparation for the refinancing, OYO has already moved its application with markets regulator Sebi to withdraw its current draft red herring prospectus (DRHP). The company intends to refile an updated version of the DRHP, after the bond issuance.

Oravel Stays Ltd, OYO's parent company, had in November prepaid a significant chunk of its debt amounting to Rs 1,620 crore through a buyback process. The buyback involved repurchasing 30 per cent of its outstanding Term Loan B of $660 million. The move brought down its outstanding loan amount to around $450 million.

A source closely involved in the company's IPO plans told PTI, "The refinancing will result in material changes to OYO's financial statements. Hence as per existing regulations, it will need to revise its filings with the regulator".

"Since the decision for refinancing is at an advanced stage, it doesn't make sense to continue pursuing IPO approval with the current financials. So it's prudent to withdraw the current application," he added.

The refinancing will extend the repayment timeline to five years -- versus the repayment of the remaining TLB due in 2026 -- the source said.

The bond issuance would significantly lower the current effective interest rate of 14 per cent on its existing $450 million Term Loan B (TLB) facility.

"The refinancing is expected to result in annual interest savings of $8-10 million (Rs 66.4-83 crore) in the first year, after accounting for the costs associated with the bond issuance. The company anticipates annual savings of $15-17 million (Rs 124.5 -141.1 crore) thereafter, almost all of which would get added to its net profits. Post the debt refinancing, the company is open to contemplating an equity round, to reaffirm investor confidence before a public listing to fortify its financial strength," the source said.

In September 2021, OYO had filed preliminary documents with the Securities and Exchange Board of India (Sebi) for a Rs 8,430 crore IPO. The launching of the IPO was delayed due to the then volatile market conditions making the company prepare to settle for a lower valuation at around $4-6 billion instead of the $11 billion it was targeting initially.