To tighten his grip on the company, OYO Hotels and Homes founder and chief executive Ritesh Agarwal is in the midst of buying back shares worth $1.5 billion (Rs 10,298 crore at current exchange rate) from early investors Sequoia Capital and Lightspeed Venture Partners, a media report said.
The deal will raise his shareholding to around 30% from 10%. Along with the stakes of the management and employees, the holding will increase to 33%, people in the know told The Economic Times, asking not to be named.
The report said Agarwal may raise secured debt of about $2 billion from financial institutions and banks in India, Japan and Europe to finance the buyback.
The company may also raise primary capital of $500 million from new and existing investors. The deal will value the firm at $10 billion.
The transaction will make Agarwal the second-largest shareholder of OYO. SoftBank holds 45-46% stake in OYO, making it the single-largest shareholder in the company by various estimates.
In a precautionary move, OYO had restricted the shareholding of SoftBank to 49.99% recently.
If it wants to acquire more shares, SoftBank can do so with the approvals of Agarwal along with two to four other investors including venture capital firms Sequoia Capital India, Lightspeed Venture Partners and Greenoaks Capital.
However, digital publication Entrackr reported that SoftBank is in advanced talks to lead a $1.5 billion investment in OYO. The round will see SoftBank buying out stakes from OYO’s minority investors. Sequoia, Lightspeed, and Greenoaks are likely to partially exit OYO, the report said.
The development is significant as it comes at a time when OYO is reportedly looking to raise another $1 billion at a valuation of $10-$12.5 billion.
According to another ET report, OYO is restructuring its business into three units — India, international, and technology and brand licensing. Citing a regulatory filing, the report said that the parent company Oravel Stays Pvt. Ltd will transfer the India business that includes hotels, co-working space and event management to its subsidiary Alcott Town Planners. Oravel Stays Pvt. Ltd will run the technology and brand while Oravel Stays Singapore Pte. Ltd will operate the global business. According to the new structure, all shareholders of Oravel Stays Pvt. Ltd will get equal shares in the India business unit. Oravel Stays Pvt. Ltd will hold a stake in the Singapore entity.
OYO told TechCircle: "As a company policy, we don’t comment on speculation. We have no further comments."
OYO has been on an aggressive global expansion drive. Most recently, it entered Vietnam as it continues to strengthen its presence in Southeast Asia. OYO said it has started with over 90 franchised hotels in six cities, including Hanoi and Ho Chi Minh, and it plans to expand its footprint to 10 cities in Vietnam by the end of 2020.
Last month, it announced a plan to invest up to $300 million in the US to expand its presence in the country. OYO is currently offering its services in popular cities across the US including Dallas, Houston, Atlanta and Miami, and promises to soon expand its presence to cities like New York, Los Angeles and San Francisco.
The company claims to be operating in more than 800 cities in 80 countries, including the US, China, Europe, the UK, India, Malaysia, Indonesia, the Philippines, Japan and several cities in West Asia.