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OYO, a hospitality major founded by Rithesh Agarwal, became a buzz from last week due to its business reasons. Recently, Rithesh Agarwal is found to be in talks with the company’s existing investors Lightspeed Venture Partners and Sequoia Capital to buy shares about $1.5 Billion to increase and have potential ownership of the company he founded.
As per reports, Agarwal seems to raise his stake to 30% from the existing 10% and to buy stake held by management and employees to take his share of the startup to 32-33%. The buying of shares is to have control and to be the second-largest stake in OYO to get back control of the company, and have the second-largest stake in OYO, after the lead investor SoftBank, who owns close to 48% of the company.
According to the media report, Agarwal is supposedly to buy $1.5 Bn worth shares from Sequoia and Lightspeed, and another $500 Mn in the form of initial capital.
Ritesh is in discussions with banks and financiers to brace up $2 billion in the form of secured debt.
OYO’s existing investors Sequoia holds 10.24% stake, and Lightspeed has 13.4% stake will now have to reduce their stakes for the deal, which is probably of getting them significant returns on their early investment in the startup.
OYO which has already stretched outside India, is now looking for further invasions in the Southeast Asian markets. The investors had also financed OYO China, the company’s separate arm which runs the operations in the country.
Interestingly, Ritesh buying back stakes is compared to the Ola founder Bhavish Aggarwal unapproved secondary stake purchase by its leading investor SoftBank. Other scenarios include Snapdeal founders Kunal Bahl, and Rohit Bansal took over the shares by buying them in which SoftBank was also the largest stakeholder.