Japanese consortium funds Ritesh Aggarwal’s $2 bn OYO share buyback

A three-member Japanese consortium, including investment banking firms Nomura Holdings and Mizuho, financed Ritesh Aggarwal’s $2 billion (Rs 13,700 crore at the current exchange rate) share buyback in Oravel Stays, owner of budget hotels chain OYO, The Economic Times reported.

Oravel is expected to pay off the loan given against shares in three years when it plans to file for an initial public offering (IPO), the report said.

The consortium will also invest an additional $500 million (Rs 3,425 crore at the current exchange rate) in the Gurgaon-based company. 

The transaction is expected to raise Aggarwal’s shareholding to around 30% from 10%, according to an earlier report by The Economic Times.  Along with the stakes of the management and employees, the holding will increase to 33%. 

The transaction will also make Agarwal the second-largest shareholder of OYO.

SoftBank, which is estimated to hold a 45%-46% stake, is the single-largest shareholder in the company. Earlier this month, OYO had restricted the shareholding limit of SoftBank, to 49.99% in a possible bid to retain control. 

The stake acquisition exercise by Aggarwal could also be an attempt by OYO to clean up the capitalisation table. The company is gearing up to go public over the next two-three years, Mint had reported recently.

OYO is also reportedly restructuring its business into three units — India, international and technology and brand licensing, The Economic Times reported. 

Oravel Stays claimed last week that it was the world's third-largest hotel chain as per room count at the end of June 2019.

The hospitality chain made its foray into China in June 2018 and went on to become the second-largest hotel chain in China in less than a year.

OYO entered the markets of Indonesia and Vietnam to capitalise on its momentum in the Asian market and expand its presence in south-east Asia.

The hospitality unicorn had announced in March that it planned to put in $200 million to expand its foothold in the south-east Asian market.

In April, the hotel chain announced plans of entering the Japanese market in partnership with SoftBank.

Oravel announced last month that it was planning to invest $300 million in the US to expand its presence in North America.

The recent acquisition of @Leisure has further helped the company strengthen its leadership in the vacation home segment in Europe.

The company claims to be operating in more than 800 cities in 80 countries, including the US, China, Europe, the UK, India, Malaysia, Indonesia, the Philippines, Japan and several cities in West Asia.

Early last week, the company announced its foray into co-working business with the acquisition of Delhi-based co-working space provider Innov8. 

OYO said it will follow a multi-brand model with three co-working brands - Innov8, Powerstation and Workflo – to cater to upper mid-scale, mid-scale and economy co-working markets, respectively.

OYO’s other investors include Airbnb, Greenoak Capital and Hero Enterprise.