Corporate finance discussions regularly touch on the subject of firm valuation. A company often does a business appraisal when it wants to sell all or part of its operations, combine with another business, or buy another business. Estimating a company’s present value while considering all of its facets involves doing a business valuation.
A business’s fair worth can be determined via business valuation for a number of reasons, such as sale price, determining partner ownership, taxation, and even fundraising.
The economic value of a business or business unit is determined by business valuation. A company can be valued in a number of ways, including by taking into account its market cap, earnings multipliers, or book value, among other factors.
- A valuation can be reached using a variety of procedures and methodologies, each of which could result in a different value.
- Corporate results or other economic developments can have an immediate influence on valuations, forcing analysts to adjust their valuation models.
- Valuation is typically a quantitative process, but it also requires some assumptions.
With its headquarters in Minato, Tokyo, Softbank is a Japanese multinational conglomerate holding corporation that specializes in investment management. The Group primarily invests in businesses involved in the financial, energy, and technology sectors. It also manages the Vision Fund, the largest venture capital fund in the world with a technology concentration, with over $100 billion in funding. Middle Eastern sovereign wealth funds are among the investors in funds.
The SoftBank Vision Fund, which makes investments in cutting-edge technologies including artificial intelligence, robots, and the internet of things, is managed by SoftBank Investment Advisers. It plans to build a portfolio of 125 AI businesses. It also invests in companies that transform retail, transportation, and real estate. Every few years, it intends to raise $100 billion for a new fund, investing roughly $50 billion annually in businesses.
OYO Homes & Hotels
OYO is a franchised and leased chain of hotels, residences, and other lodgings in India. Initially, OYO offered mostly cheap hotels when it was founded in 2012 by Ritesh Agarwal. It has more than 43,000 hotels and one million rooms in 800 cities in 80 countries as of January 2020, including India, Malaysia, the United Arab Emirates, Nepal, China, Brazil, Mexico, the United Kingdom, and the Philippines. Japan, Saudi Arabia, Sri Lanka, Indonesia, Vietnam, and the United States are just a few examples.
- Many investors are involved in the company, including SoftBank Group, Didi Chuxing, Greenoaks Capital, Sequoia India, Lightspeed India, Hero Enterprise, Airbnb, and China Lodging Group.
OYO raised $1 billion in funding in September 2018, and on February 13, 2019, the RoC filed for the $100 million it received from Star Virtue Investment Ltd.
OYO secured $100 million in funding from Didi Chuxing, a Chinese provider of on-demand transportation, in February 2019.
In order to grow his stake in the business to 30%, Ritesh Agarwal, through RA Hospitality Holdings in the Cayman Islands, agreed to purchase shares from Lightspeed Venture Partners and Sequoia India for $2 billion. With this deal, the corporation had a $10 billion valuation.
OYO raised $1.5 billion in Series F fundraising in October 2019 under the leadership of SoftBank Group, Lightspeed Venture Partners, and Sequoia India.
OYO finalized a $660 million debt fundraising round from international institutional investors in July 2021 to pay off current loans.
Before OYO’s initial public offering, Microsoft expressed interest in investing, and in September of that same year, a multi-year strategic agreement was inked.
Oyo submitted its draught red herring prospectus to the Securities and Exchange Board of India (SEBI) in October 2021 in order to raise US$1.2 billion through an IPO.
More than 500 OYO present and former employees bought almost 3 crore shares of the company in January 2022. According to the most recent valuation of OYO, which was $9.6 billion, the total value of these shares can be estimated to be around 330 crores (US$41 million).
OYO Softbank Relations
Softbank is the largest stakeholder of OYO and owns around 45% of the company.
SoftBank slashes IPO-bound OYO’s valuation to $2.7B
Softbank being India’s largest investor has cut its internal valuation to $2.7B just after OYO filed fresh documents with the exchange for its proposed Initial Public Offering.
This represents a decrease of more than 20% from the previous valuation of $3.4 billion. Estimates of SoftBank’s internal valuation are not disclosed.
However, a representative for Oyo stated, “Speculation about valuation markdown is manifestly false.”
SoftBank refuses to respond to ET’s requests for comment.
- When Oyo secured a strategic investment from Microsoft in September of last year, it was last valued at $9.6 billion.
- According to the sources mentioned above, Oyo may opt for an IPO valuation of about $5 billion.
“We have not determined the exact timing for the IPO and the IPO valuation is also highly speculative,” the company representative stated.
- Compared to its earlier aim to raise just over $1 billion, Oyo’s anticipated public offering will be smaller, ET reported in February.
- Late last year, Oyo revised its projections to roughly $7 billion due to changes in market attitude and more scrutiny of new-age enterprises. Initially, Oyo was considering a valuation of about $9–12 billion.
The Bottom Line
Valuation is the process of figuring out how much an asset or business is worth. In order to provide potential buyers and sellers of an asset or business an indication of what they should expect to pay for it, valuation is crucial. There are numerous valuation techniques, each of which has advantages and disadvantages.