InvestorQ : Is it true that some large global brokers are aggressively recommending to invest in the OYO IPO when it opens?
Dia Deshpande made post

Is it true that some large global brokers are aggressively recommending to invest in the OYO IPO when it opens?

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swati Bakhda answered.
1 month ago
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That is absolutely correct. In fact, one of the global investment houses, Bernstein, has even put out a not explaining why OY could be a great investment idea to its investors. OYO has already got approval for its Rs.8,430 crore IPO that is expected to hit the market in the December quarter. In fact, there are four justifications that Bernstein has given for recommending the OYO IPO to its investors. Here is a gist of the justification.

a) The short stay market in India is expected to be worth $1.9 billion which is huge and it is likely to cannibalize some more of the business from the branded hotel groups.

b) Bernstein also sees consolidation in hotel industry. Non-branded hotels will find it hard to invest in brands and will logically gravitate towards platforms like OYO.

c) There is also the special franchise that OYO has built over the years. For example, some of its moats are 70% direct customer franchise and 78% repeat customers boosting ROI.

d) The cost cuts in the last few quarters have resulted in a tighter income statement and reduced spillage, That has resulted in a 3-fold increase in contribution profit.

In a nutshell, the report says that valuations may look rich, but the impact is going to be a lot wider and far reaching.

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