Oyo Investors Book Exits With $3.9 Billion Valuation. Its ‘Raining’ Gains As Indian Startup Exits Gets Busier.

The Indian startup ecosystem continues to buzz with activity, as 2024 witnessed over $5 billion in exits through secondary transactions, IPOs, and block deals. The trend shows no signs of slowing down in 2025, with early investors in Oyo Rooms seizing lucrative exit opportunities.

Oyo, the hospitality unicorn backed by SoftBank Group, is now valued at approximately $3.9 billion in its latest round of secondary stake sales. Lightspeed Venture Partners and Peak XV Partners, two of Oyo’s early backers, are capitalizing on this valuation, with Lightspeed reportedly in discussions with family offices to divest a portion of its holdings. Peak XV recently sold a tranche of its remaining 3% stake, raking in $80-90 million.

Exits Continue to Deliver Gains

These exits build on the substantial $1.4 billion that Lightspeed and Peak XV collectively realized in 2019 when they sold a significant portion of their stakes to Oyo’s founder, Ritesh Agarwal. Peak XV alone has generated over $500 million from its Oyo investments before its most recent sale.

Interestingly, the latest transactions come at a premium of over 60% to the Rs 1,457 crore funding round in August 2024, which saw investments from top family offices. This demonstrates strong investor confidence in Oyo’s growth trajectory, despite the valuation being a step down from its 2021 peak of over $9 billion.

Optimism Around US Expansion and Profitability

Both Lightspeed and Peak XV remain bullish on Oyo’s prospects, citing optimism around the company’s acquisition of G6 Hospitality in the United States. The synergies from this acquisition, coupled with Oyo’s shift to profitability, have fueled interest among high-net-worth individuals (HNIs) and family offices looking to acquire stakes through wealth management firms.

Oyo’s founder, Ritesh Agarwal, has also been an active participant in recent funding rounds. In 2024, the Mankind Pharma promoter brothers invested in Oyo via a pool organized by InCred Wealth, with Agarwal contributing Rs 550 crore to the same round. While the exact financing structure of his investments remains unclear, it signals strong confidence from the founder himself.

IPO Plans on the Horizon

As Oyo eyes a potential revisit to its initial public offering (IPO) plans in the coming years, investor interest continues to mount. “The company’s financial performance and strategic acquisitions have made it a compelling pitch for new investors,” said a source familiar with the matter.

Despite facing a decade of ups and downs, Oyo has emerged as a solid investment for early backers. Lightspeed and Peak XV initially invested $25 million and $28 million, respectively, and have since enjoyed robust returns, illustrating the profitability of Indian startup investments when timed well.

Oyo’s Growth and Strategic Moves

Oyo has been making waves in the hospitality industry with its ambitious acquisitions and robust financial performance. A significant milestone for the company was its acquisition of G6 Hospitality, the American lodging franchisor behind Motel 6 and Studio 6 brands. The $525 million deal, finalized last month, marks a strategic leap for Oyo as it strengthens its foothold in the United States.

The acquisition is projected to boost Oyo’s EBITDA to over Rs 2,000 crore by FY26, with Motel 6 alone contributing Rs 630 crore in its first full year post-integration. To facilitate this acquisition, Oyo is refinancing its $450 million term loan B facility, switching to long-term debt, and raising an additional $375 million, with Deutsche Bank leading the refinancing effort.

Since its entry into the US market in 2019, Oyo has established a presence in 35 states, operating approximately 400 hotels. The company reported its first-ever profit after tax of Rs 229 crore in FY24, followed by Rs 132 crore in Q1 FY25.

Founder Ritesh Agarwal attributes this performance to strategic expansions in key markets such as India, Southeast Asia, and the US, alongside investments in Europe and the growth of company-serviced properties. This strategy shows Oyo’s transition from a high-burn startup to a profit-generating global player.

Buoyant Exits

The broader Indian startup ecosystem also had a remarkable year in 2024, with investors realizing over $5 billion through secondary transactions, IPOs, and block deals. This trend is expected to accelerate in 2025, driven by an increase in IPOs, which could potentially double from the nine recorded in 2024.

Secondary transactions, where existing investors sell shares to new ones, have emerged as a critical liquidity avenue in the wake of the 2023 funding winter. These transactions not only offer exits for early investors but also attract fresh capital for fast-growing startups nearing profitability.

Top Indian startups recorded close to $1.5 billion in secondary deals in 2024, a significant leap from the estimated $700 million in 2023. Many of these deals also included primary funding components, reflecting a hybrid approach to securing liquidity and growth capital.

IPOs and Block Deals Drive Investor Exits

The IPO market played a crucial role in facilitating exits. Swiggy, for instance, completed a $1.3 billion listing in November, with $808 million raised through an offer for sale (OFS) during the IPO and additional pre-IPO share sales worth hundreds of millions. Other startups, including Awfis, FirstCry, and Go Digit, collectively accounted for $1.6 billion in investor exits through OFS in their IPOs.

Block deals in listed companies like Zomato, Policybazaar (PB Fintech), and Mamaearth parent Honasa Consumer further added to the liquidity, with shares worth $2 billion changing hands.

At least half a dozen portfolio firms are preparing to go public in 2025, with names like Rebel Foods, Lenskart, PhysicsWallah, Purplle, and Healthkart leading the charge. Other notable players, including Bluestone, Ather Energy, and Ecom Express, have already filed draft prospectuses, while Boat, OfBusiness, Shadowfax, CaptainFresh, Zetwerk, and Urban Company are making significant progress toward their IPOs.

This projected doubling of IPOs reflects the growing maturity of India’s startup ecosystem, offering much-needed liquidity to early-stage investors and opening doors for retail and institutional participants to partake in the country’s entrepreneurial success story.

Secondary Deals. The New Liquidity Avenue

The rise of secondary transactions has been pivotal in offering liquidity to existing investors while enabling new players to gain stakes in promising startups. New venture capital firms, such as Kenro Capital and Oister Tribe Ace Fund, are doubling down on secondary investments.

• Kenro Capital recently made a $40 million investment in education platform K12 Techno Services.
• Oister Tribe Ace Fund has acquired stakes in B2B ecommerce firm OfBusiness, signaling its focus on scalable, high-growth ventures.

These secondary-focused funds play a critical role in addressing the exit needs of investors, particularly after the primary capital influx over the past three to four years.

Funding Trends. A Revival in Progress

Indian startups raised $10.9 billion in 2024 (as of December 13), a modest increase from the $9.6 billion raised in 2023. However, these figures pale compared to the $24 billion and $36 billion raised in 2022 and 2021, respectively.

This recovery in funding reflects a more selective approach by investors, with only a few high-performing startups attracting significant capital. Furthermore, the number of unicorns minted in 2024 stood at just five, a stark contrast to the unicorn frenzy of 2021 and 2022. Many unicorns from those years might no longer hold their billion-dollar valuation if subjected to a fresh funding round.

Venture Capital’s Evolving Playbook

At the same time, a new wave of venture capitalists is shaping the ecosystem, with several top partners branching out to launch their own funds. These funds are not only investing in IPO-bound startups but are also betting on secondary transactions and early-stage ventures with scalable potential.

The stage is set for a dynamic 2025, where IPOs are expected to double, and secondary deals will remain a cornerstone of liquidity for the ecosystem. This dual momentum will not only provide exits for long-term investors but also pave the way for fresh capital inflows into startups gearing up for profitability and scale.

India’s startup ecosystem, while still facing challenges like valuation corrections and funding concentration, is undeniably entering a phase of consolidation and maturity. The coming year promises to be a defining chapter in its growth story, with opportunities for both investors and entrepreneurs to make their mark.

The Last Bit. New Era for Indian Startups

The growing number of IPOs and secondary transactions demonstrate a maturing startup ecosystem in India. These exits provide much-needed liquidity for early-stage investors while paving the way for new capital inflows. For startups like Oyo, these developments signal opportunities to scale, expand, and consolidate their market positions as they prepare for future public listings.

Oyo’s strategic acquisitions, profitability milestones, and robust expansion plans place it among the top success stories of Indian startups. As the company continues to attract investor interest, it exemplifies the potential of well-timed investments and strategic growth in an increasingly dynamic market.

While Oyo’s current valuation of $3.9 billion is below its historical highs, the company’s focus on profitability, strategic acquisitions, and potential IPO ambitions are keeping investors optimistic.