NEW DELHI -- Ritesh Agarwal, the founder of India's largest hospitality company Oyo Hotels and Homes, is in the process of buying back shares from early investors Sequoia Capital and Lightspeed Venture Partners to increase his shareholding in the company, The Economic Times reported.
Agarwal may also buy shares from the management and some employees to increase his stake in OYO to about 32-33% from the current 10%.
The unicorn founder is said to be looking to finance the buyback through a $2 billion secured debt facility from financial institutions in India, Japan and Europe. OYO is expected to be valued at around $10 billion in what will be a mix of secondary and primary transactions, the report added.
While Agarwal will buy $1.5 billion worth of shares from Sequoia and Lightspeed, another $500 million will come in the form of primary capital. Lightspeed and Sequoia currently own about 13.4% and 10.24% stake, respectively, in OYO.
"The two have not made any follow-on investments in the company since 2017. This indicates that they would favor a partial exit," said Vivek Durai, founder of paper.vc.
The transaction will make Agarwal, along with the management, the second-largest shareholder in OYO after Japan's SoftBank, which currently owns about 48% of the Indian company. According to a clause in OYO's charter, SoftBank cannot increase its stake in the company beyond 50% without prior approval from the founder and its largest minority investors.
"Given SoftBank's bullishness on OYO and its willingness to continue to invest, it is likely that SoftBank will push for a complete exit by the other key investors, giving it a majority status in one of the fastest growing companies in its portfolio," Durai added.
The hospitality company commanded a valuation of $5 billion in its Series E funding round, in which it raised about $1.2 billion. According to Crunchbase, OYO has already raised about $1.7 billion in funding to date.
Hero Enterprise and China Lodging Group are the other investors in OYO.
The company is reportedly looking to streamline its operations by splitting into three units - India, international, and technology & brand licensing.
According to a separate Economic Times report citing regulatory filings, OYO's parent company Oravel Stays will transfer the India hotel business, which includes new ventures like coworking and event management, to its subsidiary Alcott Town Planners. The company's technology business and the OYO brand will be housed under Oravel Stays, while the international business will be brought under Oravel Stays Singapore Pte Ltd.
The streamlining of business seems a necessity at a time when the hospitality chain is aggressively expanding its footprint, not only within the country but also overseas. It will also give the company a sharper focus and better alignment, and improve competitiveness, the filings added.
OYO is currently present in 800 cities in 80 countries, including the U.S., China, Europe, the UK, Malaysia, Middle East, Indonesia, and Japan. The company counts India and China among its largest markets.
OYO recently announced plans to invest $50 million in Vietnam as part of an ongoing Southeast Asia expansion spree. It now operates 90 hotels in the country with 1,500 rooms under its ambit. The Indian unicorn had also announced a $50 million investment for its foray into the Philippines earlier this year. It is also in the process of building its own technology and development team in Indonesia.
Last month, OYO had announced that it will invest $100 million in China toward quality and system improvements and hiring. The allocation is a part of a $600 million capital commitment for China announced last year.