OYO's third IPO attempt has failed, too. End of the road for Ritesh Agarwal?

So OYO's third attempt at going for the IPO has fallen apart. This time, it's Softbank which has refused to go ahead, asking the company "to first improve its earnings".

While this is great news for retail investors. What does it mean for OYO's founder, its employees, and the company itself?

Short answer:

1. The founder could be forced out anytime now

2. Another lot of employees could be fired, and

3. The company will be run by management driven by investors, mainly Softbank

The core history behind this starts in 2019, when Agarwal personally bought back ~ $1.5 B worth of OYO shares from early investors (like Sequoia, Lightspeed) through a Cayman Islands entity called RA Hospitality Holdings. That debt ($1.2B of which was financed via debt from Japanese & international banks) was reportedly guaranteed by SoftBank, which was already a major investor in OYO.

In that transaction, Softbank played both sides of the trade: It guaranteed Ritesh's loan to facilitate the deal, while also benefiting from the pump in valuation being the largest shareholder.

Solely because of that transaction, OYO's valuation had reached $9.6B.

However, at the time, reports also said that "Ritesh personally borrowed ~ $1.2B from a consortium of banks, while the remaining ~$300 Mil came from his own equity and funds."

But that was a joke, of course. He never had that kind of money. It was basically a leverage play on his existing shares, routed through an offshore Cayman entity, essentially leading to a Book-entry equity injection of his shares counted again in new form.

And then began the attempts of dumping this ponzi on retail investors.

In 2021, OYO tried to IPO at a $12B valuation. This was brought down to $10B, before the whole plan eventually got stalled.

In Aug 2022, the valuation was dialled back to $7-8B, because the whole company was looking at going for a toss if it didn't inject money ASAP.

In Oct 22, DHRP addendum was filed, and the company got the SEBI approval by March. But now the valuation estimates were at $5-6B. The IPO was cancelled.

Then came January 2024, where the company's valuation was marked at $2.5B in an emergency liquidity injection situation. It raised some $35M to prevent itself from going totally bust (this was pitched as a "pre-IPO" round).

Finally, in January 2025, the third IPO plan was laid out (updated DRHP). Which was cancelled just yesterday.

Now that the IPO has been canceled, what we're looking at is URGENT repayment of:

1. $383M personal loan by Ritesh Agarwal (First tranche of the total ~$2.2B loan used for the founder-led buyback), and

2. $465M of the Term Loan B taken by OYO.

Since both of these loans were contingent on the IPO; without that, what you're basically looking at, is Softbank stepping in to:

1. Pay for Ritesh's loan and taking control of his shares sooner or later, or

2. Making the company "more efficient" (read layoffs), so it can pay the $70M/yr interest on the Term Loan, when it doesn't make as much. (OYO only made $25M in PAT last year, and can only hope to make $80-100M at MAX. That barely covers even the interest of the debt, forget about the principal).

There's also the possibility of the company eventually selling its North American and European units to cover for the overwhelming debt. Which will not only leave it without its only profit centres, but also without any "valuation" speak of.

To sum it all, this is it.

OYO's three failed attempts to IPO.

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