The founder of Oyo, founder of the hotel, would be in talks for a $ 2 billion stock repurchase

NEW DELHI – Ritesh Agarwal, founder of the largest Indian hospitality company, Oyo Hotels and Homes, is currently buying the shares of early investors, Sequoia Capital and Lightspeed Venture Partners, to increase its stake in the company The Economic Times reported.

Agarwal could also purchase shares of management and certain employees to increase its stake in OYO to approximately 32 to 33% from the current 10%.

The founder of the unicorn would seek to finance the buyout through a $ 2 billion guaranteed guarantee facility with financial institutions in India, Japan and Europe. The report is expected to add about $ 10 billion to OYO, which will be a mix of secondary and primary transactions.

While Agarwal will buy $ 1.5 billion worth of shares in Sequoia and Lightspeed, an additional $ 500 million will be provided in the form of primary capital. Lightspeed and Sequoia currently own approximately 13.4% and 10.24% of OYO's shares, respectively.

"Both companies have no longer invested in the company since 2017. This indicates that they would be in favor of a partial exit," said Vivek Durai, founder of paper.vc.

The transaction will make Agarwal, along with management, the second largest shareholder of OYO after Japan's SoftBank, which currently holds about 48% of the Indian company. According to a clause of the OYO charter, SoftBank can not increase its stake in the company beyond 50% without the prior agreement of the founder and its main minority investors.

"Given SoftBank's uptrend towards OYO and its willingness to continue investing, it is likely that SoftBank will advocate for a full exit from other key investors, giving it a majority position in the market. one of the fastest growing companies in its portfolio. "

The hotel and restaurant business raised approximately $ 1.2 billion, or $ 5 billion. According to Crunchbase, OYO has already raised about $ 1.7 billion so far.

Hero Enterprise and China Lodging Group are other OYO investors.

Organizational restructuring in sight

The company would seek to rationalize its operations by splitting itself into three units: India, the international and the technology and brand licenses.

According to a separate report released by the Economic Times and citing regulatory documents, OYO's parent company, Oravel Stays, will transfer hotel operations to India, which include new activities such as coworking and management of business. Events, at its subsidiary Alcott Town Planners. The company's technology activities and the OYO brand will be hosted by Oravel Stays, while international activities will be handled by Oravel Stays Singapore Pte Ltd.

The rationalization of activities seems a necessity at a time when the hotel chain is aggressively expanding its footprint, not only in the interior of the country, but also abroad. It will also allow the company to better target its activities, better align its bases and improve its competitiveness, the reports added.

OYO is currently present in 800 cities in 80 countries, including the United States, China, Europe, the United Kingdom, Malaysia, the Middle East, Indonesia and Japan. The company's main markets include India and China.

OYO recently announced plans to invest $ 50 million in Vietnam as part of a wave of ongoing expansion in Southeast Asia. It now operates 90 hotels in the country, including 1,500 rooms. The Indian unicorn had also announced a $ 50 million investment for its incursion into the Philippines earlier this year. He is also setting up his own technology and development team in Indonesia.

Last month, OYO had announced plans to invest 100 million dollars in China in quality and systems improvement, as well as in recruitment. This allocation is part of a $ 600 million capital commitment announced by China last year.