OYO, a hospitality major, is likely to delay its IPO for another quarter as market regulator Securities & Exchange Board of India (SEBI) has asked the company to update additional sections in its draft Red Herring prospectus (DRHP), such as B. updated risk factors, KPI’s (open legal disputes, basis for assessment) etc.
The company was earlier expected to start the IPO in the first half of 2023. The process of submitting additional updates is expected to take approximately 3 months. A source close to the company said: “It would only be reasonable to expect investors to allocate money based on the latest information and we had to provide the latest disclosures at the appropriate pre-IPO stage. This is now the most sensible course of action. It may also delay IPO plans by 2-3 months, but we will have a full fiscal year of EBITDA gains along the way.”
OYO had recently provided SEBI with financial results for the first half of fiscal year 2022-23 through an addendum to the DRHP, stating that potential investors should be made aware of the significant increase in its business performance since its IPO application in September 2021 when it first reported positive result adj. EBITDA of ₹63 crore, a 24% year-on-year increase in revenue and a 69% increase in monthly booking value (GBV per month) for its hotels in the first 6 months of FY2023.
SEBI has asked the company to now update other key information in the same manner. SEBI has mentioned in its letter to OYO: “The disclosures contained in this DRHP do not take into account the material changes/disclosures resulting from updated financial statements filed through supplements, resulting in the revised disclosure period, which in turn necessities provides material updates in risk factors, basis of the offer price, pending litigation and updates to other relevant sections of DRHP.”
SEBI’s move seems in line with its expectation of greater transparency in the IPO process. Recently, it has asked companies to share more KPIs and the basis for pricing IPOs. At its meeting with bankers earlier this week, it also shared steps to reduce the IPO processing time, which has increased to 113 days, and said it will return the application to the IPO bankers to provide the additional information in a timely manner .
DIVIDE
Published December 31, 2022
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