IPO Bandwagon Gets Bigger with Oyo and Ola Set to Launch Biggest IPOs of 2024

A private limited company comes out with an initial public offering (IPO) when it decides to offer its shares to the public for the first time. In India, big private players like Ola Electric (OET) and OYO have been planning to launch their IPOs in 2024.

For these companies however, one big challenge is meeting regulatory requirements set by the market regulator.

Since these are startup companies like Zomato and Paytm, the securities and exchange board of India (SEBI) closely monitors these tech IPOs, so they don't have to come across another Paytm like debacle.

As things stand now, Ola Electric is still eying an IPO this year while Ritesh Agarwal's Oyo is reportedly scrapping its IPO plans and aiming for a private fund raise.

Nothing is certain though...

Let's look at both these companies from different angles so that you could be prepared in advance as and when they announce their IPOs.

Market Perception and Potential

Ola Electric holds a strong position in the electric vehicle (EV) market. It also offers a seamless transition from traditional cabs to EVs.

The company grew its market share from 33.5% in November 2023 to 41% in December 2023. This growth indicates that Ola Electric is capturing a larger portion of the market.

In fact, latest developments suggest that the company has sold over 10,000 EV scooters in just three days after it shared prices... such is the dominant market position that Ola commands.

The company's journey to IPO is an important milestone in the EV revolution in India. The vision of the company is towards a sustainable future. It commits to technological advancement.

Ola's IPO is a strategic move to provide the capital needed for innovation and expansion. It also gears up for public listing to implement transformation and drive innovation in the mobility sector.

Coming to Oyo Rooms... the company has positioned itself as India's largest budget hotel brand. It caters to the needs of various segments of travellers from the middle-class audience to working professionals.

The hospitality business suffered losses due to the hit from the COVID-19 pandemic. Oyo supported asset owners by establishing a welfare fund entire annual salary during the pandemic to support the losses.

In 2023, Oyo partnered with over 5,300 travel agencies in FY2022-23 and achieved a 150% YoY growth in its travel agent network.

Financial Performance and Market Positioning

Ola Electric's revenue went up from Rs 3.7 billion (bn) to Rs 26.3 bn in financial year 2022-23.

While everything seems rosy on the revenues front, Ola's net loss doubled in 2023 owing to a steep rise in expenses. The net loss surged to around Rs 14.7 bn compared to 7.8 bn in the previous financial year.

However, Ola expects improvements in its EBITDA margins. It aims to transition from negative 157% in FY22 and negative 43% FY23 to a positive 6.6% by FY26.

Ola is aiming for EBITDA profitability of Rs 8.3 bn in FY25. The company is aiming to decrease to Rs 9.5 bn in FY24. The projected revenue for FY25 stands at Rs 46.6 bn.

Ritesh Agarwal led company OYO, on the other hand, reported a net loss of Rs 18.5 bn against revenue of Rs 49.1 bn in FY22.

In FY23, Oyo reported a 14% growth in revenue from operations at Rs 54.6 bn. The company has reduced losses over the years despite the setbacks and delays in its IPO journey.

Oyo has been planning to go public since 2021. Initially, it was aiming for a listing close to Diwali in 2023. Even so, the company is still in the process and is now anticipated to get listed later this year.

Ola Electric has emerged as a key player in the electric vehicle market with significant revenue growth. Contrastingly, Oyo encountered hurdles and delays reflecting the nature of the hospitality industry.

Submission and Approvals

Ola submitted its draft red herring prospectus (DRHP) to the market regulator on 26 December 2023, signalling the intent to launch an IPO in 2024.

The Bhavish Aggarwal-led company's price band is not disclosed yet, and it is expected to be released soon.

Oyo filed its DRHP back in October 2021. In January 2022, the company received approval from SEBI for its IPO, however, it was returned in January 2023 and the company was asked to refile the DRHP.

In December 2023, Oyo pre-filed its DRHP through a confidential pre-filing route, signalling to proceed with its IPO plans.

However, the company recently delayed its IPO due to adverse market conditions. This decision shows the company's carefulness in ensuring optimal timing for its IPO.

Latest developments also suggest that Oyo's lead bankers met the market regulator to provide an update on the company's business and the progress made so far.

In short, the hospitality company is looking to expedite its IPO approval.

Filing through the pre-filling route provides Oyo with flexibility regarding the timing of the listing. It can make adjustments based on market conditions.

Investor Backing and Confidence

Oyo has secured investments from prominent institutional investors including Softbank vision fund, Airbnb, and Lightspeed India.

Recent reports that have surfaced give more clues about the ongoing discussions about Oyo's IPO. It is speculated that Oyo might withdraw its application.

Stakeholders were informed about this possibility. However, the company remained committed to raising capital from private market investors.

Reacting to the IPO withdrawal, reports also state that OYO has denies any rumours about withdrawing the IPO.

It's believed that the company is still considering going public via an IPO, but it is also exploring alternative options to raise funding via private investors.

On the other hand, Ola is backed by investors such as Softbank vision fund, Ratan Tata's RNT capital advisors, Falcon Edge, among others. Time and again, questions have been raised regarding the confidence of the company's promoters like Bhavish Agarwal.

Agarwal plans to offload a sizeable portion of his shares during the IPO.

Financial Projections and Stability

Ola Electric aims to raise Rs 55 bn through a combination of fresh share issuances and offer-for-sale (OFS) by existing shareholders.

The management plans to allocate the funds raised towards research and development (R&D) initiatives. The company will allocate another portion of its funds for capital expenditure to the old gigafactory project.

Ritesh Agarwal, Oyo's founder expressed optimism about the company's financial performance. The company anticipates achieving adjusted earnings of Rs 8 bn before considering interest, tax, depreciation, and amortisation (EBITDA) in FY24. Moreover, it has a healthy cash corpus of Rs 27 bn highlighting its financial strength and stability.

Oyo revised its IPO size targeting 40-60% of its initial US$1.2 bn (Rs 84.3 bn). proposal. The revised plan allocates Rs 70 bn for fresh issue and the remaining for OFS.

Bottom-Line

Both these companies - Ola and Oyo are gearing up for their IPOs in 2024.

Ola's electric market leadership depicts promising opportunities. Similarly, Oyo has positioned itself as the largest budget hotel brand.

As an when these companies decide to come out with their IPOs, your approach to gauge IPOs shouldn't be any different than how you assess other listed companies.

The stock should tick both the qualitative as well as quantitative boxes rather than just selling a story of how the future is all roses and sunshine even as the past and the present are all dark and disappointing.

Stay tuned to this space.

For more, check out the current IPOs and upcoming IPOs on our website.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...