India Digest: Oyo in talks with Softbank to raise $500m; True North may pick up majority stake in HFFC

Oyo Rooms

Oyo Rooms is in talks with existing investor SoftBank to raise a $500 million round, while private equity firm True North has signed an agreement to acquire a majority stake in Home First Finance Company (HFFC).

Oyo in talks with Softbank to raise $500m fresh funding

Budget hotel aggregator Oyo Rooms is in talks with existing investor SoftBank to raise a $500 million round of financing at a valuation of $1.2 billion, which would put the startup in the league of the Unicorns if the deal goes through, said a Times of India report, quoting sources.

At present, the Gurgaon-based company is valued at $460 million.

SoftBank currently holds around 26 per cent stake in Oyo and its shareholding would top 50 per cent if the deal goes through in the proposed form.

“SoftBank has put in a term sheet, a non-binding agreement between the company and the investor, but the terms are yet to be finalised.The amount they (SoftBank) want to put in will tantamount to heavy dilution for all shareholders and therefore it’s taking time,” a source cited earlier in the report said.

According to the news report, a large of this planned fund raise from SoftBank will be invested into Oyo’s new offering, Townhouse (earlier called Flagship), which leases properties and services them for better quality experience in a move to fix quality issues.

PE firm True North likely to pick up majority stake in HFFC

Private equity firm True North, formerly Indi-an Value Fund, has signed an agreement to acquire a majority stake in Home First Finance Company (HFFC) for about $100 million, according to a report in The Economic Times citing sources.

Through the deal, the mortgage firm which was set up in 2010 by former Mphasis chairman Jaithirth (Jerry) Rao and PS Jayakumar, has been valued at $150-175 million.

According to the sources cited in the report, the the proposed transaction involves a secondary sale by existing shareholders and fresh issue. HFFC raised capital from Bessemer Venture Partners and Tata Capital Growth Fund in earlier rounds, giving them a 45-50 per cent holding. Rao and Jayakumar together have about 40 per cent and the rest is with management under the leadership of CEO Manoj Viswanathan.

Out of $100 million, True North will invest vest about half in the company and the rest will be paid to the existing shareholders, said the source. “Besides True North, the management will have a 10% stake in the company and balance about 30% will be with these investors,” the source said.

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