Oyo’s New Game Plan As Its Valuation Hits $4.6 Bn, To Invest Rs. 550 Crore Through RedSprig Innovation Partners LLP, Co-Founded By Ritesh Agarwal And Gaurav Gulati

Oravel Stays Limited, the parent company of OYO, is making fresh headlines as Nuvama Wealth and Investment Limited recently acquired shares worth ₹100 crore in the company at ₹53 per share through a secondary market deal.

This transaction, which involved family office investors, has pegged OYO’s valuation at an impressive $4.6 billion. While the valuation is a marked recovery from its previous lows, it still lags behind the $10 billion peak the company once commanded.

Strategic Exits and New Entrants

This deal has allowed OYO’s early investors to make partial exits while opening doors for potential new strategic investors. Talks are reportedly underway with stakeholders such as Incred, which may invest at a price range of ₹53-60 per share, potentially pushing OYO’s valuation to $5.2 billion.

These developments indicate a broader shift in OYO’s investment strategy, balancing exits for seasoned backers and the onboarding of fresh capital for growth.

Profitability and Acquisitions

OYO’s financial performance has been on an upswing. The company achieved a net profit of ₹158 crore in Q2 FY2025, following a ₹132 crore profit in Q1, bringing its H1 net profit to ₹290 crore.

This turnaround is significant compared to the ₹91 crore net loss in the same period of the previous fiscal year. OYO’s annual report for FY2024 also shows its first-ever profit after tax of ₹229 crore.

In addition to profitability, OYO’s growth strategy includes acquisitions. The recent $525 million all-cash acquisition of G6 Hospitality, the parent company of Motel 6 and Studio 6, marks a major milestone. This move not only expands OYO’s presence in the economy lodging segment but also in scaling operations globally.

The company is onboarding a new hotel every 2-3 days in Rajasthan and plans to establish a back office in the state to support its overseas operations. Speaking at the Rising Rajasthan Summit, Agarwal stated that around 1 lakh customers book OYO hotels daily in India, with a similar number staying in its properties overseas.

Founder’s Role and Fresh Investments

Interestingly, founder Ritesh Agarwal, through his newly created entity RedSprig Innovation Partners LLP, is set to lead a fresh ₹550 crore ($65 million) funding round in OYO.

RedSprig Innovation Partners LLP, co-founded by Ritesh Agarwal and Gaurav Gulati in November 2021, and appears to be a financial vehicle or investment-focused entity.

Its main purpose seems to involve facilitating strategic investments, the structure might allow for better financial flexibility, regulatory benefits, or separation of Agarwal’s personal investments from OYO’s direct finances. The LLP has a registered obligation of contribution of ₹28.35 crore and operates out of Delhi, India​.

Investing in OYO through an entity like RedSprig Innovation Partners LLP, rather than directly, could be driven by several strategic, financial, and legal considerations.

So what could be the potential reason?

1. Tax Efficiency

Minimizing Tax Liabilities: By routing the investment through a separate entity, the founder could structure the transaction to optimize tax implications, both on the initial investment and on future returns.

Capital Gains Planning: Using an LLP may provide more flexibility in managing capital gains, especially if the entity is designed to hold multiple investments.

2. Investment Pooling and Diversification

Attracting Co-Investors: RedSprig Innovation Partners LLP might serve as a vehicle to pool investments from other investors alongside Ritesh Agarwal. This could strengthen OYO’s funding base while allowing Agarwal to maintain control.

3. Legal and Regulatory Compliance

Simplifying Compliance: Investing through an LLP might streamline compliance with regulatory frameworks, especially if the funds come from diverse sources or jurisdictions.

Reducing Personal Exposure: By investing through an entity, the founder can/may limit personal liability and separate personal finances from corporate interests.

4. Strategic Business Positioning

Negotiation Leverage: Having an intermediary entity could provide Agarwal greater flexibility in negotiating terms with OYO or other stakeholders.

Leverage for Additional Financing: RedSprig might raise debt or equity from other sources to fund its investment in OYO, enabling Agarwal to invest more without using only personal funds.

6. Valuation and Ownership Dynamics

Avoiding Direct Dilution: Investing through an LLP might allow for creative ownership structuring, ensuring Agarwal retains significant influence in OYO’s cap table.

Influence on Valuation: The indirect investment could potentially impact the valuation and optics of the funding round, influencing how other investors perceive the deal.

7. Confidentiality and Strategic Moves

Maintaining Confidentiality: Routing funds through an LLP might provide an additional layer of discretion about the source of the investment.

Exploring New Ventures: The entity could be a way for Agarwal to explore related business opportunities while maintaining a clear separation from OYO’s core operations.

Thus, this approach is likely a calculated move designed to maximize financial returns, enhance strategic flexibility, and optimize legal and regulatory compliance

Despite its valuation recovery, OYO’s $4.6 billion valuation is still a shadow of its former glory. However, the company’s profitability, aggressive acquisitions, and strategic funding moves signal a robust growth trajectory. The question remains: can OYO sustain this momentum and reclaim its peak valuation?

The coming months will likely provide clarity as the company navigates new investments, executes its global expansion plans, and addresses questions surrounding its founder’s funding strategy. For now, OYO seems firmly on the path of revival, blending calculated risks with ambitious growth plans.