OYO: According to a source familiar with the subject, SoftBank, Oyo’s largest investor, has reduced the Indian hotel chain’s valuation to $2.7 billion when the business is still months away from going public.

According to an Oyo spokesman, the startup’s finances have improved in recent months, and it feels like the talk regarding a valuation decrease is false. The reduction has “no rational basis,” according to the spokeswoman. SoftBank did not respond.

Oyo was valued at around $10 billion in a round in 2019 by investors such as Sequoia India and Lightspeed Venture Partners India (both of which have made significant exits from the firm), Airbnb, and Microsoft. According to Tracxn, Oyo has raised $3.23 billion in equity (primary + secondary) and debt investment rounds over the years.

According to the startup, SoftBank controls 45% of Oyo. It’s not uncommon for investors to raise or lower the valuation of their portfolio businesses, even if other private investors disagree. Because SoftBank is Oyo’s largest investor and controls roughly half of the company, the Japanese firm’s estimate is a strong indicator of the startup’s current health.

According to a separate person familiar with the subject, Oyo conducted a board meeting earlier this month and did not make any changes to its valuation, nor did it acknowledge or comment on SoftBank’s estimate. “We are certain that the aforementioned hypotheses about valuation markdowns are demonstrably false.”

The outcome of company performance is valuation. “According to our most recent audited statistics, we earned Rs 7 crore in maiden AD EBITDA profit in the June quarter, with a 41% gross profit margin and a 45% increase in gross booking value per hotel per month compared to the previous fiscal year,” an Oyo spokesman said in a statement.

“These are significantly improved results, and the positive performance trend is projected to continue.” As a result, there is no reasonable justification for a discount. Sources say that the valuation was cut because SoftBank had already cut the value of the Indian startup to $3.4 billion.

The news comes as Oyo is still months away from going public. The business amended its initial public offering application to the local market regulator earlier this week. Oyo had aimed to raise up to $1.16 billion in the IPO at a valuation of up to $12 billion.

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