India’s startup ecosystem is at an all-time high, and this is one of the main factors that’s driving the India story forward. As these startups burgeon in size, the next big step for them is getting listed on the national stock exchanges, namely, the National Stock Exchange, and the Bombay Stock Exchange. Here, we will be taking a look at one of the most hotly anticipated startup offerings, the Oyo IPO. We’ll explore its various nitty-gritty and the numerous nuances that characterize this listing. So, let’s start.
Oyo: The Indian startup giant
Founded formally in 2012 by Mr. Ritesh Agarwal, Oyo is a startup behemoth that has established its presence in the massive, yet fragmented global hospitality ecosystem. Since its inception, the brand has focused heavily on the short-duration stay space and its business model enables customers and partners to transform a fragmented, unbranded, and unregulated hospitality and lodging industry into one that is standardized, branded, safe, and easily accessible.
The Oyo Initial Public Offer aims to raise a total sum of 800 million USD, a 33% reduction from the initially planned figure of 1.2 billion USD. Now, let us take a brief look at what factors make this particular IPO an especially tempting proposition for investors.
- Oyo features the largest network of hotel storefronts anywhere in India and Southeast Asia.
- According to RedSeer, Oyo sports the second largest footprint in Europe among full stack short-stay accommodation.
- One of the biggest strengths of the firm is the fact that they operate on an extremely asset-light basis. The hotel storefronts that are a part of the Oyo platform aren’t owned by the firm but are instead owned and maintained by private owners and partners. This asset-light model ensures minimal risks in case of rough business weather and helps make changes as and when needed that much easier.
- Oyo is a full-stack tech platform that provides the entire value ecosystem to the customers.
- Oyo Initial Public Offer is accompanied by two patron applications, namely, Co- OYO, and OYO OS.
- One of the factors that make this IPO especially lucrative is its rising patron satisfaction scores. The scores more than doubled from 30.1% in September 2020 to 72.3% during the quarter that ended March 21.
- The unit economy of Oyo has improved immensely from 5.1% in 2020 to 18.4% in 2021.
- The workstreams and other measures have improved immensely as well, with Oyo looking to expand globally and take the revolution to other countries as well in the near future.
These are the several factors that make investing in the Oyo IPO a good proposition.
Now, let us take a look at the various factors that would be critical in determining the future of the business and how the market would perceive the IPO once it hits the trading floors.
1. The grey market
The IPO grey market is something that gives a fair idea regarding the listing gains or losses and can be understood as a parallel, unregulated market that enables investors and traders to purchase shares and securities of companies before they end up getting listed on the secondary markets.
This IPO grey market hypes up once the listing dates draw close and the prices prevalent in the grey market, also known as the GMP, are crucial for a lot of investors who make their purchase calls on this basis. As the Oyo application date draws closer, we would gain a pretty good knowledge of the GMP and the direction of the waves before Oyo gets listed.
2. The brand
Oyo benefits greatly from its local network and its operating leverage. The firm is an expert at managing demand and supply on its platform and its profits are greatly driven by this expert balancing act. The brand features numerous touchpoints, thereby building a compelling and valuable brand image before its patrons and partners.
According to Kantar research, 2020, Oyo is the most valuable brand in its sector and the 30th most valuable brand overall. A feat that is extremely commendable for a startup firm to attain.
3. The market
Oyo focuses primarily on the Indian, European, and SEA markets. These regions are extremely lucrative from unit economics and retail size standpoint. Their asset-light business model has allowed them to expand rapidly without a huge amount of cash burn, as against owning every property themselves. This factor also lends them a significant edge over its competitors in these short-stay industries.
4. The management
The continued existence and consistent growth of any firm depend greatly on the people who are at the helm, and Oyo does not disappoint in this regard as well. Not only are the decision makers highly qualified and experienced but also constitute a mix of experts, tech giants, consumer brands, and professional service companies. Oyo also features an excellent track record of retaining its best talent, who in turn help take the brand to newer heights.
5. The promoters
The promoter holding of the company stands at 79.77%.
The competition
The Indian securities market doesn’t have any rivals who might be directly competing with Oyo, which helps the brand carve out a smart niche for itself and dominate that space, thus spurring growth.
Final take
Oyo’s Initial Public Offering remains one of the most awaited ones of the year, with expectations of significant IPO grey market premiums a strong possibility. The startup is in a very stable and secure position to ride this wave and flourish beyond what it has already achieved.
Also read: Should You Buy IPO-bound Stocks From Unlisted Markets?
