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Ritesh Agarwal Planning Share Buyback to Counter SoftBank’s Boardroom Influence

Ritesh Agarwal, founder & CEO of Oyo Hotels & Home, is staging a comeback plan that is likely to overhaul the ownership pattern in the Gurugram based startup. The 26 year old founder is planning to start a share buyback process in order to consolidate his ownership in the company, according to media reports.

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Oyo’s founder & CEO Ritesh Agarwal Planning to bu back $1.5 Bn shares

Existing investors Sequoia Capital and Lightspeed Venture Partners will be the main participants in the share buyback process, with the former reportedly holding nearly 10.24% and latter owning 13.4% stake in the company. Both invested Rs 165 crore and Rs 158 crore respectively to purchase the ownership stake in Oyo.

With Agarwal’s buyback process, both these existing investors will get the opportunity to make a profitable exit from one of their most high-profile portfolio companies. Agarwal, on other hand, will see his ownership stake increase from the present 10% to nearly 30%. The young CEO has already initiated talks with several leading financial institutions to finance the share buyback process, sources privy to the matter have claimed.

Agarwal trying to wrest back control from SoftBank             

Agarwal’s bold move to buyback shares is seen as a counter step to curtail SoftBank’s influence over the company. SoftBank is the largest investor with nearly 48% stake in Oyo. The Japanese investor further increased the stake to propel it near to the threshold of 49% by buying back some shares from existing investor Greenoaks few months back.

According to the agreement, SoftBank cannot increase its ownership stake in Oyo before seeking prior approval from Agarwal and other existing investors.

Agarwal is the not first one to challenge SoftBank’s influence in the boardroom. Ola’s co-founder and CEO Bhavish Aggarwal successfully managed to outweigh SoftBank’s influence in the company’s boardroom by diversifying the ownership. Ola’s CEO brought in independent investors like Sachin Bansal and other VC firms on the company’s board to curb SoftBank’s boardroom powers.

SoftBank, which owns substantial stakes in several Indian high profile startups,  is infamous for vetoing founder and co-founders’ boardroom decisions. It did this in the case of Flipkart that led to a tiff with co-founder Sachin Bansal who later exited the company in the wake of Wal-Mart’s takeover.

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