OYO’s early backers Sequoia, Lightspeed reap $1.5 billion in partial exit from Ritesh Agarwal’s share buyback

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Updated: July 19, 2019 11:49:25 PM

Lightspeed and Sequoia are selling about 50 per cent of their stake for $1.5 billion to allow founder Ritesh Agarwal in the buying back shares worth $2 billion through RA Hospitality Holdings.

The fundraising is most likely to help increase Ritesh Agarwal’s share in the company from around 10 percent to over 30 percent. (Image: Bloomberg)

Global hospitality chain OYO’s early investors Lightspeed Venture Partners and Sequoia India are selling about 50 per cent of their stake for a whopping $1.5 billion to allow founder Ritesh Agarwal in the buying back shares worth $2 billion through RA Hospitality Holdings — investment vehicle incorporated by Ritesh Agarwal in the Cayman Islands recently to increase his stake in the parent company Oravel Stays, two sources familiar with the development told Financial Express Online. SoftBank, which currently holds 45 percent stake in the company is expected to increase it further in future rounds in the company even as its stake cannot go beyond 49.99 percent, the source added.

The fundraising is most likely to help increase Ritesh Agarwal’s share in the company “from around 10 percent to over 30 percent even as Sequoia and Lightspeed are selling their partial stake from current 10.24 percent and 13.4 percent respectively. The valuation, following the capital infusion for OYO, would be $10 billion,” another source told Financial Express Online. Lightspeed had initially invested in OYO back in 2014 along with DSG Consumer Partners, as per deals tracker Crunchbase. The investment was reportedly around Rs 4 crore. It later participated in successive Series A till Series E round in September last year. Sequoia beginning with reported Rs 30 crore investment around 2014, also continued investment till Series E round. However, their total investment and respective returns made from this partial exit couldn’t be ascertained.

OYO denied commenting on the returns made by the two investors.

Also read: Ritesh Agarwal’s OYO, SoftBank set up investment vehicle, seek CCI approval for increasing stake in Oravel Stays

The Japanese multinational SoftBank is restricted to enhance its shareholding in the company from more than 49.99 percent as per the negotiated shareholder agreement arrived at during OYO’s Series D round of funding from SoftBank. OYO had $250 million Series D round led by SoftBank in September 2017. Hence, for SoftBank to enhance its stake by acquiring stakes of Lightspeed and Sequoia Capital, Ritesh Agarwal’s consent is required as per the company’s Articles of Association.

This is among the first such buyback of shares by a founder in the hospitality sector from existing investors to raise his shareholding in the parent company Oravel Stays. “This should be seen as a bold move as it shows the founders’ confidence in the company’s growth that hasn’t been seen earlier by any other Indian startup globally and a good way to ensure he and his management have control and are able to protect the interests of minority shareholders,” the source said.

Financial Express Online had earlier this week reported that RA Hospitality Holdings had filed a notification with the Competition Commission of India seeking its nod likely to increase stake in Oravel Stays by acquiring some or all the shares of Sequoia Capital and Lightspeed.

Global cab-hailing giant Ola’s founders Bhavish Aggarwal and Ankit Bhati had reportedly last year sought a similar approval from CCI for increasing their stake in parent company ANI Technologies through Singapore incorporated Lazarus Holdings — a special purpose investment vehicle used as an investment holding company.

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