OYO IPO set for further delay due to refiling of the updated DRHP to SEBI by Feb 2023

Hotel booking company Oyo, operated by Oravel Stays Ltd will refile draft papers for its initial public offering (IPO) by the middle of February with the Securities and Exchange Board of India. In September 2021, the company had filed preliminary documents to raise ₹8,430 crores.

Oravel Stays Ltd., which operates the hospitality major OYO, will be refiling its public listing application Draft Red Herring Prospectus (DRHP) with the market regulator SEBI by mid-February 2023. The market regulator had asked the company to update additional sections in its DRHP, such as updated risk factors, KPIs, outstanding litigations, basis for valuation etc. OYO had said the refiling process would take around three months. 

Commenting on the same, an OYO spokesperson said, “We are working on updating all key sections simultaneously. Responsibilities have been divided among different teams, with senior company leaders driving the collaboration with the Book Running Lead Managers, essentially the IPO bankers, the lawyers, and the auditors. We are keen on refiling the DRHP by the middle of Feb 2023, if not earlier.”  However, OYO has not provided the timeline for the regulators’ approval, post-filing. 

OYO’s addendums

OYO had submitted through an addendum to the DRHP, the first half of FY 2022-23 financial numbers to SEBI citing that potential investors need to be made aware of the material uptick in its business performance since its IPO application in September 2021 when the company had filed preliminary documents to raise ₹8,430 crores.

It had reported its maiden positive adj. EBITDA of ₹63 crores, a 24 per cent year-on-year increase in revenue and 69 per cent increase in monthly booking value (GBV per month) for its hotels in the first six months of FY23.

SEBI’s move seemed to be in line with its expectation of higher levels of transparency in the IPO process. Lately, it has asked companies to share more KPIs and the basis for the pricing of IPOs.

SEBI, in its letter to OYO, had said, “The disclosures contained in present DRHP do not take into account the material changes/disclosures arising from updated financial statements as filed through addendums leading to revised period for disclosures which in turn leads to necessities to make material updates in Risk Factors, Basis of Offer Price, Outstanding Litigations and update other relevant sections of DRHP.”

A Draft Red Herring Prospectus is a document which introduces a business to potential investors, and contains the company vision, targets and results. It has to communicate details effectively to the target audience, and is scanned by SEBI for adequate information. Data in it doesn’t include the number of shares and the issue price for the IPO.

In the first half of FY23, Oyo had submitted an additional red herring prospectus, to make sure that investors are aware of its performance since the IPO application date in 2021. The market watchdog has allowed Oyo to submit updated financial data before reviewing and processing the company’s IPO application.

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