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

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Updated: July 16, 2019 5:09:53 PM

The new entity is likely to increase the holding of Ritesh Agarwal and SoftBank in Oravel Stays by acquiring some or all the shares held by Sequoia Capital and Lightspeed -- OYO’s early investors, and possibly Greenoaks too.

OYO and a Cayman Islands-based RA Hospitality Holdings have filed a notification with the CCI seeking its approval for increasing stake in Oravel Stays.

Global hotel and home chain OYO and a Cayman Islands-based entity called RA Hospitality Holdings has filed a notification with the Competition Commission of India (CCI) in order to increase stake in Oravel Stays — OYO’s parent company.

RA Hospitality Holdings, where RA probably stands for Ritesh Agarwal, is perhaps a special purpose vehicle set up as an investment holding company. The notification is sourced from business signals platform Paper.vc.

“The Cayman Islands entity is most probably an investment vehicle with joint shareholding by Softbank and Ritesh Agarwal and possibly backed by a financial institution as well. It appears to follow the same template followed by Bhavish Aggarwal when he sought to increase his stake in Ola,” Vivek Durai, Founder, Paper.vc told Financial Express Online.

OYO didn’t comment on the development.

The new entity is likely to increase the holding of Ritesh Agarwal and SoftBank in Oravel Stays by acquiring some or all the shares held by Sequoia Capital and Lightspeed — OYO’s early investors, and possibly Greenoaks too, Durai said in a separate note.

Also read: SoftBank might push OYO’s early investors Sequoia Capital, Lightspeed India to exit to increase shareholding

Financial Express Online had last week reported that Sequoia and Lightspeed might exit from the company following SoftBank’s push to increase in holding in the company from around 48 per cent. 

The Japanese multinational SoftBank is currently restricted to increase its shareholding from more than 49.99 per cent 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.

“The proposed combination (of parties including RA Hospitality Holdings and Oravel Stays) relates to the acquisition of the equity securities in Oravel Stays on a fully diluted basis by RA Co,” according to the notification with CCI.

“The Proposed Combination involves: (a) subscription to equity securities of OYO by RA Co; and (b) the acquisition of part of the equity securities held by certain existing shareholders of OYO,” the notification said. Moreover, it is also expected to bring more capital in OYO that will either come from a completely new entity or from SoftBank, Durai added.

“OYO’s capitalization table has seen a significant cleanup in recent years with most of the early investors having exited. The new move will likely complete the cleanup before SoftBank plans fresh infusions of capital to fuel OYO’s move to go global,” a source aware of the development had told Financial Express Online earlier. However, the two funds might go ahead with a partial exit, another source had told Financial Express Online.

Last year Ola’s founders Bhavish Aggarwal and Ankit Bhati have sought CCI approval for enhancing stake in parent company ANI Technologies through Singapore incorporated Lazarus Holdings — a special purpose investment vehicle used as an investment holding company, PTI reported. The move was aimed at the indirect acquisition of less than 10 per cent of the share capital of ANI by Ankit Bhati, Bhavish Aggarwal and MacRitchie through Lazarus, according to the CCI notice. MacRitchie is an indirectly wholly-owned subsidiary of Singapore-based Temasek Holdings.

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