OYO board approves $1.5 bn infusion from SoftBank, RA Hospitality

OYO board approves $1.5 bn infusion from SoftBank, RA Hospitality
Photo Credit: VCCircle
25 Nov, 2019

Budget hospitality chain OYO Hotels & Homes will receive $1.5 billion from founder Ritesh Agarwal and existing investor SoftBank Group Corp, following the approval of the primary capital infusion by the board of Oravel Stays, the Gurugram-based company that owns OYO.

The company will issue 15,325 Series F preferential shares to SoftBank subsidiary SVF India Holdings, and 13,169 equity shares to Agarwal-owned RA Hospitality. Both entities are registered in the Cayman Islands, according to the latest regulatory filings.

The shares will be issued at $52,643.22 a share, the filings showed. However, according to an independent valuation report, Oravel Stays’ shares are valued at $45,540.93 a share.

On the completion of the transaction, SoftBank’s stake in the company will increase by 0.83% to its maximum limit of 49.99%. In July, Oravel Stays had capped the Japanese conglomerate’s shareholding in the company to 49.99% through the ‘Softbank Standstill Obligation’ in order to retain majority control.   

RA Hospitality will hold a 8.60% stake in the company. Agarwal in his personal capacity holds 9.43% while Oravel Employee Welfare Trust owns a 5.34% stake. The deal will also make Agarwal the second largest shareholder in the company after SoftBank.

The board approval for the $1.5 billion planned capital infusion comes a month after Oravel Stays announced plans to raise $700 million from Agarwal and the balance from SoftBank. The deal also creates a partial exit for existing investors Lightspeed Venture Partners and Sequoia Capital India.

The company plans to use the capital to grow its US operations and improve its presence in the vacation rental market in Europe, it said earlier. However, the deal is also seen as OYO’s attempt to clean up the capitalisation table. Oravel Stays is said to be in the process of listing its shares in a couple of years.

Other than Softbank, Lightspeed and Sequoia, other investors in Oravel Stays include Greenoaks Capital, Hero Enterprise, China Lodging Group, Star Virtue Investment and Airbnb.

San Francisco headquartered budget stays platform Airbnb had confirmed its investment in OYO in April this year. The investment, it had said at the time, was aimed at enabling it to gain access to franchised and leased hotels as it sought to expand beyond its staple home rentals.