Fitch assigns Oravel, facility B

Fitch Ratings said it assigned Oravel Stays Private Ltd. (OYO) a first-time expected B long-term foreign- and local-currency issuer default rating. Fitch also gave an expected rating of B with an RR4 recovery rating to the proposed senior secured loan facility to be issued by OYO's fully owned subsidiary, Oravel Stays Singapore Pte Ltd. OYO and certain other subsidiaries within the group will guarantee the facility.

“OYO's ratings reflect its technology-led platforms, which connect partnered hotels and homes to travelers in its core markets of India, Europe and south-east Asia. OYO has a short operating history of only about seven years and a weak financial profile characterized by EBITDA losses. Its business model benefits from high stickiness with property owners due to revenue-sharing with them, moderate competitive barriers and minimal capex requirements,” Fitch said in ap ress release.

The outlook is negative. “OYO's ratings have low headroom as it is uncertain if EBITDA can turn positive in the financial year ending March 2023 (FY23) and it is likely to have a larger FCF deficit in FY22, amid a second wave of Covid-19 infections in India. Liquidity at FYE21 is adequate, but a further extension of travel-related restrictions, especially in India, can lead to larger-than-expected negative FCF and increase liquidity risk,” Fitch said.

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