The OYO IPO has taken a major step forward after the company filed its Updated Draft Red Herring Prospectus (UDRHP). OYO plans to raise ₹6,500 crore through a 100% fresh issue, making it one of the most closely watched upcoming IPOs in India. Investors following the OYO Pre IPO market and OYO Unlisted Share price were eager to see how the company intends to use the capital. One figure immediately stood out—₹4,987 crore, or nearly 77% of the IPO proceeds, will be used to repay debt. That naturally raises an important question: why is a company preparing to go public using most of the money to reduce debt instead of investing in future growth?
The Growth Story Looks Strong at First Glance
At first glance, OYO’s financial performance appears encouraging. In 9M FY26, the company reported ₹6,940 crore in revenue compared with ₹6,252 crore in FY25, representing 11% year-on-year growth. For anyone reading only the headline numbers, it would appear that OYO is growing steadily. However, after digging into the geographic breakdown provided in the OYO UDRHP, it becomes clear that the overall growth story is much more concentrated than the headline suggests.
India, which has traditionally been OYO’s largest market, reported a 10% decline in revenue. The United Kingdom declined by 38%, while Europe fell by 1%. In contrast, the United States recorded an impressive 51% growth. Based on the reported numbers, the US alone appears to have contributed roughly 13 percentage points of growth, while weakness across India, the UK and Europe pulled consolidated growth back to 11%. In other words, OYO’s recent growth has largely been driven by a single geography.
Gross Booking Value Reveals an Even Bigger Shift
The transformation becomes even more obvious when looking beyond revenue and examining Gross Booking Value (GBV). OYO’s US GBV increased from approximately ₹972 crore in FY24 to around ₹12,023 crore in 9M FY26. During the same period, US revenue increased from about ₹827 crore to ₹1,879 crore. As a result, the United States now contributes roughly 52% of OYO’s global GBV, compared with only 9% in FY24. This remarkable shift shows just how quickly the company’s business mix has changed over a relatively short period.
A Tiny Network Is Generating a Huge Share of Business
One of the most surprising insights from the OYO IPO filing is the difference between the size of OYO’s US network and its financial contribution. OYO operates around 293,554 storefronts globally, yet only 2,087 storefronts are located in the United States, representing less than 1% of its total network. Despite this, those properties contribute approximately 27% of the company’s revenue and an astonishing 52% of its Gross Booking Value. This demonstrates that the average US property generates significantly higher booking value than hotels across most of OYO’s other markets.
Revenue Yield Is Moving in the Opposite Direction
Another interesting trend appears when comparing bookings with reported revenue. In FY24, every ₹100 of bookings generated roughly ₹26 of reported revenue. By 9M FY26, every ₹100 of bookings generated only around ₹16 of revenue. Although booking volumes have increased sharply, revenue has not grown at the same pace. This suggests that OYO’s revenue yield has declined significantly even as booking value has surged.
India’s Business Continues to Face Challenges
While the United States has become OYO’s primary growth engine, the Indian business appears to be losing momentum. Over the last three years, India’s revenue has grown at only around 3.3% CAGR, barely keeping pace with inflation. More importantly, the company reported a 10% decline in Indian revenue during 9M FY26. For a business that was built in India, this raises important questions about the long-term strength of its home market.
The Company Has Changed Its India Strategy
In response to these challenges, OYO has significantly shifted its operating model in India. Instead of relying primarily on franchise hotels, the company has expanded its managed hotel business, where OYO takes greater operational control over the properties. The contribution of managed hotels to India’s Gross Booking Value increased from 2.6% in FY24 to 23.3% in FY25, before reaching 49.3% in 9M FY26. Today, nearly half of every booking rupee generated in India comes from managed hotels. Despite this major strategic shift, the Indian business has still failed to deliver meaningful growth, suggesting that the company continues to face structural challenges in its largest domestic market.
The US Expansion Came Through Acquisition
The primary reason behind OYO’s extraordinary growth in the United States appears to be its acquisition of G6 Hospitality, the parent company of Motel 6 and Studio 6, for approximately ₹4,460 crore. The acquisition dramatically expanded OYO’s presence in the US market and largely explains the sharp increase in both revenue and Gross Booking Value. However, acquisitions of this scale rarely come without financial consequences.
Growth Came With a Higher Debt Burden
Following the acquisition, OYO’s debt reportedly increased from approximately ₹3,603 crore to around ₹7,485 crore. This significant increase in leverage explains why the company intends to use ₹4,987 crore, or around 77% of the IPO proceeds, to repay debt. Rather than funding aggressive future expansion, most of the money raised through the OYO IPO will be used to strengthen the company’s balance sheet and reduce future interest costs.
What This Means for OYO IPO Investors
For investors evaluating the OYO IPO, this distinction is important. Many companies use IPO proceeds to build new businesses, expand into new markets, invest in technology or launch new products. OYO has chosen a different path. The majority of the capital being raised will effectively refinance debt created by previous expansion, particularly the acquisition of G6 Hospitality. This is not necessarily a negative decision, as reducing debt can improve profitability, lower finance costs and strengthen the balance sheet. However, investors should recognise that a large portion of the IPO money is being used to strengthen the business after past acquisitions rather than directly funding future growth.
Final Thoughts
After reading the OYO UDRHP, my biggest takeaway is that OYO’s headline growth tells only part of the story. Much of the company’s recent expansion has been driven by the United States following the G6 Hospitality acquisition, while its core Indian business continues to face pressure despite a major shift toward managed hotels. The decision to allocate 77% of the IPO proceeds toward debt repayment makes financial sense because it will improve the balance sheet and reduce interest costs.
However, the key question for investors tracking the OYO Pre IPO market and OYO Unlisted Share remains unchanged: Can OYO revive sustainable growth in India and generate organic growth after reducing its debt, or will future growth continue to depend on acquisitions? That is the question that will ultimately determine the long-term success of the OYO IPO.
Continue Exploring OYO Before the IPO
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