Insider’s Guide - Unmasking Key Details of Oravel Stays Limited IPO

About Oravel Stays Limited

Oravel Stays Limited, founded by Ritesh Agarwal, is an Indian multinational chain of living spaces, homes and franchised hotels. Launched in 2012, Oyo has become one of the dominant players in the short-stay accommodation market. With a PAN India and global presence, it has reshaped the short-stay accommodation segment. It has also developed a technology platform to address the pain points of its patrons on the supply side and customers on the demand side.

Its patrons comprise lessors, owners and storefront operators on its platform. More than 157k storefronts are using its tech to boost their revenues.

IPO details

• IPO date

The company filed its draft red herring prospectus (DRHP) in September 2021. However, the exact dates of the IPO are yet to be announced.

• Price band

The IPO's price band is yet to be set. The price band is the range you can apply for the IPO. When the IPO opens, you must choose a price within the band to apply for the issue.

• Issue size

As per the initial DRHP filed with SEBI, the issue size consisted of equity shares aggregating up to ₹ 84,300 million. Out of this, ₹70,000 million worth of equity shares were fresh issues, while offer for sale constituted equity shares aggregating up to ₹14,300 million.

• Lot size

Lot size refers to the minimum number of shares you need to purchase. So, suppose an IPO’s lot size is 50, it means you can’t purchase less than 50 shares. That said, the lot size of the company’s IPO is yet to be known.

Utilisation of the IPO proceeds

As per the initial DRHP, the company plans to utilise:

• ₹24,410.10 million for prepayment or repayment in part certain borrowings availed by its subsidiaries
• ₹29,000 million for funding its organic and inorganic initiatives for growth

The company plans to use the remaining proceeds for general corporate purposes.

Company strengths and risks

The following are the strengths of the company:

• Elevated presence and influence in key growth markets
• Comprehensive technology platform delivering a compelling value proposition to our patrons and customers
• Deep involvement with its patron and customer community
• Robust flywheel powered by potent network effects
• A reliable consumer brand

The associated risks are:

• The company has experienced net losses every year since its incorporation and therefore attainment of profitability may be postponed.
• The company may not sustain growth at historical rates and could encounter challenges in expanding and implementing its growth strategies.
• Failure to maintain its current patrons and customers may lead to a revenue decline. It could adversely impact its business and financial standing.
• The company depends on external distributors, travel management firms and global distribution systems to distribute and promote its storefronts. This could impact its margins and profitability negatively.

Wrapping it up

With the short-stay accommodation market poised for growth, Oyo is well-positioned to take advantage of it, thanks to its technological prowess and dominant presence. It will be interesting to see how its IPO shapes up when announced and whether it can live up to its hype or not.