SoftBank-Backed Hospitality Giant Aims for a $5 Billion Valuation Amid Lender Pressure
Oyo Hotels & Homes, the hospitality startup backed by SoftBank, is accelerating its initial public offering (IPO) plans as founder Ritesh Agarwal faces mounting pressure from lenders to clear a $383 million debt repayment, according to a Bloomberg report.
The deadline for the repayment is October 2025, and Oyo’s lenders—including Mizuho Financial Group—have made it clear that if the IPO fails to materialize this year, Agarwal will be expected to settle the outstanding loan personally. While an extension until 2027 remains a possibility, it is contingent upon the successful completion of the IPO.
Debt Pressure Accelerates Oyo’s IPO Plans
The company has delayed its IPO multiple times over the past few years, largely due to the impact of the COVID-19 pandemic, which severely disrupted the hospitality sector. Now, as travel rebounds and investor sentiment improves, Oyo is actively engaging with bankers to push through the long-awaited public listing.
Key Financial Highlights and IPO Target:
- Oyo is targeting a valuation of up to $5 billion for the IPO, according to insiders.
- SoftBank remains Oyo’s largest investor, holding more than 40% of the company, while Agarwal retains over 30% ownership.
- The loan restructuring agreement from 2022 has allowed Agarwal to delay repayments, but lenders are now demanding repayment or an IPO.
Oyo’s Financial Recovery and Growth Prospects
Oyo’s rapid expansion and aggressive global scaling strategy, particularly in Japan and the United States, resulted in significant financial strain. Encouraged by SoftBank’s ambition to dominate the budget hospitality market, the startup expanded too quickly, leading to operational inefficiencies and legal troubles.
The COVID-19 crisis further exacerbated Oyo’s financial struggles, causing widespread losses and forcing the company to restructure operations and cut costs. However, Oyo returned to profitability in FY 2024, marking a turnaround from previous years of continuous losses.
Agarwal’s $2.2 Billion Loan and SoftBank’s Support
Agarwal took out a $2.2 billion loan in 2019, secured with backing from SoftBank’s CEO, Masayoshi Son. The loan was restructured in 2022, yet the first tranche of payments remains due.
Reports suggest that SoftBank continues to support Oyo, though it remains unclear if the Japanese investment giant will provide further assistance should the IPO fail to meet valuation expectations.
Family Office Dismisses “Rumour-Mongering” Over Debt Woes
Despite widespread reports on Oyo’s financial strain, Agarwal’s family office has dismissed concerns, calling the debt-related speculation “completely incorrect and just rumour-mongering.”
A spokesperson from Agarwal’s family office also disputed reports on Oyo’s IPO valuation, stating that figures circulating in the media do not align with the company’s actual market value, which they claim is higher than recent secondary transactions.
Challenges and Roadblocks Ahead for Oyo
While Oyo appears to be on the path to profitability, its IPO ambitions still face multiple challenges, including:
Valuation Concerns:
- Oyo is aiming for a $5 billion valuation, but industry analysts question whether the company can achieve this, given past financial struggles and ongoing legal disputes with hotel partners.
Regulatory Hurdles:
- The company has had regulatory run-ins in multiple markets, particularly in India and the US, where it has faced lawsuits over contractual disputes and business practices.
Market Conditions:
- With interest rates remaining high and global market volatility, investor appetite for tech IPOs has remained mixed.
Debt Burden:
- The $383 million repayment deadline is a major risk factor. If Oyo fails to launch its IPO or raise alternative financing, Agarwal could face personal financial liability.
Oyo’s Path Forward: A Race Against Time
Despite these challenges, Oyo is betting on the recovery of the travel and hospitality industry to drive its IPO success. The company has streamlined its operations, cut costs, and focused on profitability, making it a more attractive prospect for public market investors.
If Oyo successfully lists on the stock exchange in 2025, it would mark one of the largest IPOs in the Indian startup ecosystem. However, the company remains under intense pressure from lenders, making the success of its IPO crucial for its financial survival.
What’s Next?
- Oyo is currently in talks with investment bankers to finalize its IPO roadmap.
- Agarwal must navigate lender expectations and market conditions to ensure a smooth public listing.
- The IPO’s pricing and investor interest will be key indicators of Oyo’s financial health and future prospects.
With the debt repayment deadline fast approaching, Oyo is in a race against time to go public, raise funds, and secure its long-term financial stability.
