New Delhi: Fitch Ratings on Monday announced it has upgraded the rating of OYO parent firm Oravel Stays, citing the hospitality company’s improved financial profile.
Fitch upgraded Oravel Stay’s long-term foreign and local currency issuer default ratings to ‘B’ from ‘B-‘ with a ‘Stable’ outlook, according to a statement. It has also upgraded the rating on the USD 660-million senior secured term loan facility due 2026 to ‘B’ from ‘B-‘.
“The upgrade reflects our estimate that OYO’s EBITDA leverage will improve to below 5x on sustained EBITDA growth amid cost savings, a demand recovery in the short-term stay market and OYO’s buyback of USD 195 million in debt in November 2023,” Fitch stated.
This upgrade comes shortly after OYO reported a net profit of nearly Rs 99.6 crore (USD 12 million) in 2023-24, Founder Ritesh Agarwal told employees in a townhall last week.
“OYO’s liquidity is adequate due to a sufficient cash balance and our expectation of positive free cash flow from the financial year ending March 2025 (FY25),” Fitch stated.
OYO had recently concluded a debt buyback of USD 195 mn (Rs 1,620 crore).
Fitch has also highlighted OYO’s adequate liquidity position, with around USD 95 million in unrestricted cash as of March 2024, higher than their post-debt buyback expectation of USD 80-90 million.
“We believe OYO’s improving profitability and declining leverage should support its ability to refinance the debt in a timely manner,” Fitch stated.
The rating agency said it expects travel and tourism industry conditions to continue to improve in OYO’s key end-markets in FY25.
