The global chain of hotels and homes OYO and a Cayman Islands-based entity called RA Hospitality Holdings have filed a notification with the Competition Commission of India (ICC) to increase their stake in Oravel Stays, the parent company of ‘OYO.
RA Hospitality Holdings, where RA probably stands for Ritesh Agarwal, may be a special purpose vehicle created as an investment holding company. The notification comes from the Paper.vc trade signals platform.
“The Cayman Islands entity is most likely an investment vehicle with joint ownership of Softbank and Ritesh Agarwal and possibly backed by a financial institution as well. It seems to follow the same model that Bhavish Aggarwal followed when he sought to increase his stake in Ola, ”Vivek Durai, founder of Paper.vc told Financial Express Online.
OYO has not commented on the development.
The new entity is likely to increase Ritesh Agarwal and SoftBank’s stake in Oravel Stays by acquiring all or part of the shares held by Sequoia Capital and Lightspeed – OYO’s first investors, and possibly also Greenoaks, Durai said in a separate note.
Also Read: SoftBank Could Push OYO’s Early Investors Sequoia Capital and Lightspeed India to Pull Out to Increase Stake
Financial Express Online had announced last week that Sequoia and Lightspeed could exit the company following pressure from SoftBank to increase the stake in the company by about 48%.
Japanese multinational SoftBank is currently limited to increasing its stake by more than 49.99 percent in accordance with the shareholder agreement negotiated during OYO’s Series D funding round from SoftBank. OYO completed a $ 250 million Series D funding round led by SoftBank in September 2017. Therefore, for SoftBank to increase its stake by acquiring stakes in Lightspeed and Sequoia Capital, Ritesh Agarwal’s consent is required pursuant to articles of association.
“The proposed combination (of parties including RA Hospitality Holdings and Oravel Stays) relates to the acquisition of Oravel Stays equity securities on a fully diluted basis by RA Co”, according to the notification to CCI.
“The Proposed Combination involves: (a) the subscription to OYO equity securities by RA Co; and (b) the acquisition of part of the equity securities held by certain existing shareholders of OYO ”, states the notification. In addition, he is also expected to bring more capital to OYO which will come either from a brand new entity or from SoftBank, added Durai.
“The OYO capitalization table has undergone a significant cleanup in recent years, with most of the early investors exiting. The new move will likely complete the cleanup before SoftBank plans further injections of capital to fuel OYO’s decision to go global, ”a source familiar with the development told Financial Express Online earlier. However, the two funds could make a partial exit, another source told Financial Express Online.
Last year, Ola founders Bhavish Aggarwal and Ankit Bhati applied for ICC approval to increase their stake in parent company ANI Technologies through Singaporean company Lazarus Holdings – a special purpose investment vehicle used as an investment holding company, PTI reported. The transaction aimed at the indirect acquisition of less than 10% of the share capital of ANI by Ankit Bhati, Bhavish Aggarwal and MacRitchie via Lazarus, according to the opinion of the ICC. MacRitchie is an indirect wholly owned subsidiary of Singapore-based Temasek Holdings.