Oyo Hotels eyes $450 million bond sale for refinancing

Oyo Hotels, under its parent company Oravel Stays Ltd., is currently negotiating to secure up to $450 million through dollar bonds.

The move is aimed at refinancing an existing high-cost loan, with discussions involving raising between $350 million and $450 million. This financial strategy is designed to extend the repayment period of its term loan B, which is due in 2026, by an additional five years.

Why refinance now?

The decision to refinance through the bond market comes as Oyo experiences delays in its initial public offering (IPO). The company, once seen as a trailblazer in the Indian startup scene, is opting to restructure its finances to better manage its debt. In 2021, Oyo took on a $660 million loan and has since repaid a portion, leaving about $465 million outstanding.

The bond issuance will also necessitate significant changes to Oyo's IPO plans. According to reports, the refinancing will require Oyo to refile its draft red herring prospectus with India’s securities regulator. This is because the changes in their financial structure due to the refinancing will materially impact the disclosures previously made to potential investors.

How Is Oyo performing financially?

Recently, Oyo reported its first-ever profit in the September quarter, signalling a turnaround from its earlier financial struggles. Despite achieving profitability and exploring refinancing options, Oyo’s future in the public markets remains uncertain.

The company’s founder, Ritesh Agarwal, has been actively seeking to launch an IPO and even engaged in talks for equity funding with the Malaysian sovereign wealth fund Khazanah Nasional Bhd earlier this year. However, a definitive timeline for the IPO has not yet been established, leaving Oyo's long-term market strategy open to speculation.