Budget hospitality and hotel chain OYO has expanded its authorized share capital from Rs 1.17 crore to Rs 901 crore, according to regulatory filings with the ministry of corporate affairs (MCA). This comes ahead of OYO’s proposed IPO.
OYO also seeks to allot close to 97 Series F2 cumulative compulsorily convertible preference shares (CCCPS) to Salesforce Ventures, it declared in a separate filing.
“The term ‘shareholders’ agreement’ shall mean the shareholders’ agreement of the company coming into force and effect at the earlier of the following two dates: (i) allotment of 80 Series F2 CCCPS to Microsoft Corporation; or (ii) allotment of 97 Series F2 CCCPS to Salesforce Ventures LLC (as may be amended, supplemented, superseded or replaced from time to time),” OYO has said in the second filing.
“As a prominent travel tech company, we receive regular interest from strategic and financial investors. However, there has been no such investment or transaction till date that you are referring to,” an OYO spokesperson said about the allotment to Salesforce Ventures.
Salesforce Ventures could not be reached immediately for a comment.
Last month, OYO issued close to 80 Series F2 CCCPS shares of the face value of Rs 100 each to tech giant Microsoft at an issue price of the rupee equivalent of $58,490 per Series F2 shares. The investment is expected to value OYO at $9.6 billion. If a similar pricing is followed, Salesforce Ventures’ investment in OYO could go up to $5.67 million.
“These are large strategic investors who come at the pre-IPO stage. The terms and conditions of such transactions are usually kept confidential,” said a banker who works closely with the firm, on condition of anonymity.
The expansion of authorized capital comes at a time when OYO is actively exploring an IPO worth $1.2 billion on the Indian exchanges by early 2022 and has initiated talks with bankers such as JP Morgan, Citi and Kotak Mahindra Capital to help with the issue.
“This is a standard practice where compulsorily convertible preference shares of investors need to be converted into equity shares, before a big liquidity event. Hence, authorized capital needs to be increased before a company files its draft prospectus with the Securities and Exchange Board of India and also makes space for retail investors while going public. Based on the subscription agreements, equity shares will be issued to investors,” said Amarjeet Singh, senior international tax and regulatory partner with KPMG India.
OYO raised debt funding worth $660 million in July from global institutional investors, including Fidelity Investments, via the term B loan route.
OYO’s aspirations to list comes at a time when several startups are making a beeline for the public markets. The second half of this year is expected to see unicorns, including beauty marketplace Nykaa, insurtech and lending platform Policybazaar, logistics major Delhivery and financial major Paytm list on Indian exchanges.
“Recent listings is giving further confidence to big Indian investors to come in as anchor investors during pre-IPO stages. Further, with listed Indian tech startups sustaining their growth, the interest of Indian anchor investors is only expected to grow,” Singh said.