Fitch revises Oyo's outlook to 'positive', affirms ratings
Synopsis
Fitch affirmed the ratings on the $660 million senior secured term loan facility due 2026, issued by Oyo's fully owned subsidiary, Oravel Stays Singapore, at 'B-'. The outlook revision is on the optimism that Oyo is on track to generate positive EBITDA and cash flow from operations sustainably, driven by a greater reduction in operating costs despite weaker-than-expected growth in gross booking values (GBV) in FY23.
The outlook revision is on the optimism that Oyo is on track to generate positive EBITDA and cash flow from operations sustainably, driven by a greater reduction in operating costs despite weaker-than-expected growth in gross booking values (GBV) in FY23.
This follows positive EBITDA in every quarter of the financial year ended March 2023 (FY23), the first year of profits since Oyo's incorporation in 2012.
"We expect significant growth in its EBITDA in FY24, led by an ongoing demand recovery in the travel and tourism industry, the company's stable gross margins, and reduction in operating costs," Fitch said.
Fitch sees the ongoing demand recovery in the hotel industry to drive revenue growth of over 20% for the company in FY24.
Earlier, another rating agency Moody’s, also said it expects Oyo to remain Ebitda positive for the financial year 2023-24 and overall outlook to remain stable.
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The company, on its part, estimates revenue in FY23 to be over Rs 5,700 crore, up 19% from Rs 4,780 crore it had recorded in FY22.
Fitch expects this recovery to continue over the upcoming summer holiday and be supported by a recovery in business travel, which initially picked up at a slower pace.
According to reports, the company's issue size has likely been reduced to $400-600 million, consisting entirely of freshly issued shares, with all the proceeds going to the firm.