The rating reflects OYO's asset-light business model "that benefits from minimal capex needs, largely exclusive distribution rights, pricing control over storefront inventory, fixed revenue share and strong long-term growth potential", it added.
On improved cost structure, Fitch said, "We expect the cost-reduction measures OYO undertook in recent years to support its improving profitability in FY24. We believe such reductions will not affect growth, as it has increased its business development staff to prioritise storefront additions."
The ratings agency also said it estimates that "OYO's unrestricted cash at FYE23 is sufficient to fund its Fitch-estimated free cash flow deficit of around USD 7 million and annual debt repayment of around USD 6 million in FY24".
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