Early backers Lightspeed, Sequoia set to pocket about $1.5b from OYO part-exit

Oyo Townhouse. Photo: Bloomberg

Lightspeed Venture Partners and Sequoia Capital, who were among the early investors in Indian hospitality company OYO Hotels & Homes (OYO), are set to take home a total of about $1.5 billion in one of the biggest exits in the country’s startup ecosystem till date.

On Friday, OYO founder and CEO Ritesh Agarwal announced that he will invest $2 billion in buying back shares and in infusing fresh capital into the company, a part of which would come from early investors.

Lightspeed is expected to rake in about $1 billion by selling half of its current 13.4 per cent stake in OYO, making 50X returns on its five-year-old investment. In all, the company had invested about $20 million into the six-year-old company, The Economic Times reported. 

On the other hand, Sequoia is expected to garner about $500 million from the partial stake sale. The Silicon Valley venture capital, which has infused about $27 million into the company so far across different funding rounds, holds a 10.24 per cent stake in OYO.

The transaction, which is being routed through Cayman Islands-registered RA Hospitality Holdings, will see Agarwal’s stake in OYO going up to 30 per cent from nearly 10 per cent while Sequoia and Lightspeed will still own over 5.5 per cent and 6.5 per cent, respectively, in the Indian hospitality company. Japan’s SoftBank is currently the largest shareholder in OYO with about a 48 per cent stake.

The deal is interesting owing to the quantum of returns the duo are earning on their investments in the company, especially when exits remain a rare phenomenon in the startup space. Both Lightspeed and Sequoia did not make any follow on investments in OYO since 2017.

One of the other big exits in the startups space was that of Tiger Global from Flipkart. The New York investment firm Tiger Global realized $3 billion when American retail giant Walmart bought a majority stake in Flipkart last year.

Meanwhile, OYO commanded a valuation of $5 billion in its Series E funding round, in which it raised about $1.2 billion. It is, however, reportedly valued at $10 billion in the latest transaction.

It also counts Airbnb, Greenoaks Capital, China Lodging Group, and Hero Enterprise among its list of backers.