Credit ratings agency Moody’s Investors Service said Indian hotel aggregator OYO Hotels and Homes Pvt Ltd remains on track to turn EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) positive, in the current fiscal year, buoyed by a strong demand recovery and various cost reductions.
Moody’s said it expects OYO to post around $50-55 million EBITDA (after share-based payment expenses) in fiscal 2024, which ends on March 31, 2024. The ratings agency added that a strong recovery in travel demand combined with various cost optimisation measures undertaken by OYO has improved its operating performance over the past 12-18 months.
OYO reported an adjusted EBITDA of around Rs245 crore ($29.9 million) in FY23, its first year as a profitable firm, and was reportedly aiming for an adjusted EBITDA of Rs 800 crore in FY24, its founder Ritesh Agarwal recently told employees in a town hall.
The SoftBank-backed company had initially filed to go public in October 2021 but delayed the share sale due to market conditions. In March this year, it reportedly submitted a confidential “pre-filing” document for a likely slimmed-down initial public offering in March this year.
Excluding share-based payments, OYO has been generating positive EBITDA since April 2022, Moody’s said.
In its attempt to become profitable, OYO has also been cutting costs. In December, the company laid off 600 employees in its corporate and technology departments.
Moody’s also cautioned that OYO’s fiscal 2024 EBITDA will fall short of covering its interest expenses of around $85 million, resulting in negative cash flow from operations in the absence of any material working capital movements. However, sustained earnings growth beyond fiscal 2024 will allow the company to cover its interest expenses and generate positive cash flow from operations in fiscal 2025.
OYO has good liquidity. The company’s existing cash and cash equivalents will remain sufficient to support its operations until it starts generating positive cash flow from operations over the next 12-18 months, Moody’s said.