Fitch upgrades outlook for OYO’s long-term issuer ratings to ‘positive’

Fitch has revised the ratings of OYO-owned Oravel Stays Limited’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to Positive from Stable, while affirming the ratings at 'B-'. The credit ratings and analysis company also affirmed OYO’s $660 million senior secured term loan facility due 2026, issued by another subsidiary, Oravel Stays Singapore, at 'B-'. 
 
Fitch Ratings on Wednesday said it has revised the outlook on Oravel Stays Ltd's (OYO) long-term foreign- and local-currency issuer default ratings to 'positive' from 'stable', while affirming the ratings at 'B-'.
 
In a statement, Fitch highlighted the reason behind the revision.
 
"The outlook revision reflects our view that OYO is on track to generate positive EBITDA and cash flow from operations (CFO) sustainably. This follows positive EBITDA in every quarter of the financial year ended March 2023 (FY23), which is the first year of profits since OYO's incorporation in 2012," the statement read. 
 
Furthermore, the US-based company also said that it expects continued and a significant growth in its EBITDA.
 
"We expect significant growth in its EBITDA in FY24, led by an ongoing demand recovery in the travel and tourism industry, the company's stable gross margins, and reduction in operating costs." The rating reflects OYO's asset-light business model "that benefits from minimal capex needs, largely exclusive distribution rights, pricing control over storefront inventory, fixed revenue share and strong long-term growth potential," it added.
 
The report also noted that the company has filed two addendums to its prospectus in September and November 2022, updating investors about its improving business performance during 1HFY23.
 
OYO filed a draft prospectus in September 2021 for a stock listing in India, with plans to raise Rs 84.3 billion, of which $330 million was planned for pre-payment of debt. 

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