Daybreak - Third time unlucky — why Softbank pulled the plug on Oyo’s latest IPO attempt

Episode Date: May 18, 2025

At first glance, things seem to be really looking up for India’s very own budget-friendly hotel chain Oyo. It’s had some pretty big wins in the last few months. So why then is its eventual IPO still the subject of such widespread speculation? The Ken's Deputy Editor Seetharaman G put it quite well in the latest edition of his newsletter on the Indian stock market, ‘Long and Short’. He said – ‘few companies are as good as Oyo Hotels at not going public’. Its listing has been a few years in the making. It first filed in 2021. Then again in 2023. And then it was just about to give the share sale another shot when its largest shareholder, Softbank, threw a spanner in the works.Here's the thing — between the delayed IPO, top notch rivals, and demanding investors, things will only get harder for Oyo. Tune in. If you have any thoughts or questions about this episode, send them to us as texts or voice notes on Daybreak’s WhatsApp at [phone]. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. At first glance, things seem to be really looking up for India's very own budget-friendly hotel chain, Oyo.

It's had some pretty big wins in the last few months. At its town hall just this month, Oyo founder and everyone's favorite Shack Tank judge, Ritej Agarwal, proudly declared that it had officially become the country's most profitable start-up this year. After a tough couple of years, got to see the pandemic, ballooning losses and some pretty brutal layoffs. Not only did it manage to clock its made-in profitable year in FY24, its profits surged by more than 170% to touch well over 600 crore rupees the following financial year. The company also managed to land a pretty significant legal win recently.

After years of back and forth, the Delhi High Court finally ruled in its favour in its long-standing dispute with Zostal hospitality over a failed acquisition. If I believed in luck, I would say it's currently on Oyo's side. So why then is its eventual IPO still the subject of such widespread speculation? My colleague Sita Ramanji put it quite well in the latest edition of his newsletter on the Indian stock market long and short. He said, and I quote, few companies are as good as Oyo hotels at not going public. Its listing has been a few years in the making.

It first filed in 2021, then again in 2023. And then it was just about to give the share sale another shot when its largest shareholder, SoftBank, threw a spanner in the works. Bloomberg reported that SoftBank early. urged Oyo to hold off until its earnings were even stronger. So now the goal is apparently to try and list as early as March 26 at a valuation of more than $7 billion. Interestingly, when it was looking to list back in 2021, it was hoping for a valuation of $12 billion. But now things are different.

Between the delayed IPO, top-notch rivals and demanding investors, things are about to get much harder for Oyo. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahel Philippos and I don't chase the news cycle. Instead, every day of the week, my colleagues Nikita Sharma and I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 19th of May. Okay, forget the numbers for a moment. If there's one thing tech companies have learned in the last few years, it's that public market investors are a lot less credulous than VCs.

There's no better example of this in action than Ola Electric. The company listed back in August and shares doubled within a week, largely thanks to the powerful story its controversial CEO, Bhaesh Agarwal, was able to weave around the brand being rooted in India. But cut to now, and Ola has lost its leadership in electric two-wheelers and is now facing flak over the mismatch between its own sale numbers and the government's vehicle registration data. No wonder softbanks, founder and CEO, Masayoshi-san, isn't particularly chuffed about Ritesh's rush to get listed.

Bottom line is, the public market investor is discerning and a solid story will only take you so far. The problem for Oyo now is not when to take it public, but what exactly will be taken public? By now we're all quite well acquainted with the Oyo business model. It doesn't own its properties. Instead, it provides capital and training to hotel owners across the country to provide a standardized budget hotel experience. In exchange, they get a franchisee fee. But Oyo has not been able to pull off what its biggest competitors like Marriott or Hilton

have. Those chains dictate everything from the location of the hotel to its design, to pricing, to the standard operating procedures for everything, things like guest service, hotel maintenance, all of it. It's their brand that is at the business. stake after all. Meanwhile, Oyo gives small hotels software for inventory management and digital check-ins. In fact, back in 2021 in its IPO papers, it claimed to assess hotels every month for compliance with its standard operating procedures. Now, that doesn't quite compare to the

arrangements and the protocols that large hotel brands have in place with its own operator network. That's why Oyo's rapid growth, how it expanded from under 13,000 to over 18,000 hotels in FI-24, should not exactly inspire awe. Having said that, Oyo's attempts to turn things around in the last few years is pretty evident. We discussed how it managed to swing to profits in FI-24, but that came at the cost of not adding to its revenue. In fact, in the two years leading to FI-24, Oyo's parents' revenue rose a mere 13. percent to 5,540 crore rupees. Compare that to the Tata Group's Indian hotel company,

which more than doubled its revenue in the same period to almost 6,800 crore rupees. It also managed to make a lot of money in the process. Its profits in FI24 were more than four times what was reported pre-COVID. So, what will Ritesh's pitch be when Oyo does eventually go public? Because those looking to bet on a no-frills hotel operator, typically gravitate towards Lemon Tree Hotel. Even a company with a mere 11 hotels in three cities, Blackstone-backed, Wendive Hospitality,

has found favour among investors with its industry-leading revenue per available room. ITC hotels and EIH, which run the Oberoi and Trident Chains, had their fans too. What's common to all these companies is how simple their business models are. Meanwhile, Oyo continues to brag about empowering thousands of small hotels with its two-sided technology platform, whatever that means. Now, the other reason for the delay in Oyo's plans of going public could be because of the $2.2 billion loan Ritej took back in 2019.

The loan was provided by a consortium of Japanese banks led by Mizuho and Nomura with a guarantee from Sun to increase his ownership in Oyo. Reports suggest that the repayment timeline of the loan, which was restructured in 2022, is tied to Oyo's listing. While the transaction has little to do with Oyo's business, the idea of its CEO repaying a loan backed by the CEO of its largest shareholder

is sure to turn away those investors on the fence. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks

daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippos, produced by me Snigda Sharma and edited by Rajiv Sien.