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Oyo founder’s $1.5 billion stock buyback plan gets CCI nod

Ritesh Agarwal plans to undertake a $1.5 bn stock buyback, & pump in an additional $500 mn into OYO.

Updated: Sep 17, 2019, 11.28 AM IST
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Oyo has raised $1.6 billion in equity funding till date, reaching a valuation of $4.5-$5 billion in its last funding round. Airbnb, Grab Holdings and Didi Chuxing are among its other investors.
NEW DELHI | MUMBAI: The Competition Commission of India (CCI) has given necessary approvals to Ritesh Agarwal, group chief executive of hospitality chain Oyo Hotels & Homes, to undertake a $1.5 billion stock buyback, along with pumping in an additional $500 million into the Gurugram-headquartered company.

The approval from the country’s antitrust regulator, which is believed to have come in earlier this week, will allow Agarwal to facilitate an ambitious and unprecedented transaction through a Cayman-registered entity, RA Hospitality.

It will see the 26-year-old ramp up his shareholding in the firm he founded in 2013 to an estimated 30%.

Agarwal confirmed receiving the CCI approval and said, “I am thankful to the CCI and all our investors and shareholders for supporting me. The company will get an additional primary infusion of approximately $1.5 billion to support our mission. This will be utilized to maintain our leadership position in India and China, strengthen our footprint in Southeast Asia, Middle East, growing our business in Europe and the US while creating a niche for our vacation homes business globally."

ET was the first to report on July 8 about Agarwal’s plan to buy back shares by picking up stake from existing investors.

Agarwal will be financing the buyback through debt from Japanese banks Nomura and Mizuho. The deal has set a new valuation benchmark of $10 billion for Oyo.

As part of the transaction, two of Oyo’s early investors — venture funds Lightspeed Venture Partners and Sequoia Capital — will rake in the richest ever cashout in the country’s startup ecosystem so far.

Lightspeed, which manages capital of about $310 million across its two country-specific funds in Asia’s third-largest economy, is set to earn an estimated $1 billion from the sale of half of its current 13.4% stake in Oyo, a company it first invested in 2014.

In all, Lightspeed has invested about $20 million into the six-year-old company, earning 50X returns on its five-year-old investment.

Separately, Sequoia Capital, which manages assets of about $3.9 billion in the country and holds a 10.24% stake in Oyo, will take in about $500 million from the partial stake sale, having put in about $27 million into the company across rounds. It also first partnered with the SoftBank-backed hospitality chain in 2014.

Agarwal, along with the management, will now be the second-largest shareholder after SoftBank Vision Fund, which owns almost 48% of the company.

However, as per clauses drawn up by Oyo, the Japanese group cannot increase its ownership beyond 49.9% without receiving approvals from Agarwal, Sequoia, Lightspeed and Greenoaks Capital.

SoftBank had bought back some shares from Greenoaks as part of a secondary transaction a few months ago, sources in the know had told ET.

All told, Oyo has raised $1.6 billion in equity funding till date, reaching a valuation of $4.5-$5 billion in its last funding round. Airbnb, Grab Holdings and Didi Chuxing are among its other investors.
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