Eye on revival, Oyo secures $660 million debt

Oyo Hotels & Homes has closed a debt financing round of $660 million from global institutional investors to service existing loans, according to people aware of the company’s aim to recover from the disruption caused by the pandemic’s second wave.

Wall Street investors such as Fidelity, Citadel Capital Management and Varde Partners have subscribed to Oyo’s term loan B (TLB), sources told ET.

Oyo did not confirm the name of the participating investors but said its TLB was “oversubscribed” almost 1.7 times, with a total commitment of nearly $1 billion.

On the back of strong interest from these institutional investors, Oyo increased the offering size by 10% to $660 million, from $600 million initially. This resulted in the whole financing being raised at an interest rate of 825 basis points, compared to the initial price guidance of 850 basis points, the company said.

According to the terms of the deal, Oyo has to pay back the principal loan amount after six years while paying interest at regular intervals.

According to Abhishek Gupta, group chief financial officer, Oyo, the funds will be used to retire the company’s past debts, strengthen the balance sheet and other business purposes, including investment in product technology.

Emails sent to Fidelity did not elicit any response till press time on Thursday.

“This will enable Oyo to widen its shareholder base and get significant third-party validation in terms of where the business quality is,” said a person aware of the plans. International ratings agencies Moody’s and Fitch have rated Oyo as stable, company executives told ET.

Oyo had also secured debt from now defunct UK lender Greensil, which was backed by SoftBank, an investor in Oyo too. That loan is also being paid back currently, according to sources.

Covid-19 Impact
The latest round comes at a time when the hospitality sector in India is yet to fully recover from the impact of Covid-19, even though the bookings are gradually picking up as lockdown restrictions are lifted. A potential third wave of the pandemic could again disrupt the sector, due to which market conditions remain uncertain.


At a recent event, founder Ritesh Agarwal said Oyo still has cash of around $800 million in the bank and that its monthly burn is in the range of $4-5 million across businesses. Currently, 43% of its revenue comes from India and South East Asia, while 28% comes from Europe and the rest from other global markets.

The company had to cut down on operations in markets such as the US and China. Even in India, it had to trim its workforce significantly to curtail spending in light of the pandemic’s impact on gross bookings.

“We are seeing a healthy recovery, with a vaccination rate of over 40% (of the total population) in Europe. In India, we are three to four months away from a vaccination rate of more than 40%. Once India is there, it means a much stronger recovery is coming up,” said Gupta, who sees the latest financing round as a testament to the strength and success of Oyo’s products at scale and its high-value potential.

“Oyo is well capitalised and on the path of achieving profitability. Our two largest markets have demonstrated profitability at the slightest signs of industry recovery from the pandemic,” said the chief financial officer.