How Deferred Tax Credits Helped Oyo Parent Report ₹748 Cr Net Profit | Explained

Oyo parent PRISM has reported a net profit of ₹748 crore for the nine months ended December 31, 2025, in its updated Draft Red Herring Prospectus (DRHP), as the hospitality technology company moves closer to its proposed initial public offering (IPO).

The company's profit before tax for the period stood at ₹245 crore, while a deferred tax credit of ₹559 crore significantly lifted its reported net profit.

Deferred tax credit (more accurately, a deferred tax benefit recognised through a deferred tax asset) is an accounting adjustments linked to the expected utilisation of accumulated tax losses or other tax assets against future taxable income.

It is not an operating income and do not represent cash generated by the company, although they improve reported earnings.

The company had reported a net profit of ₹245 crore in FY25 and ₹230 crore in FY24, following a loss of ₹1,287 crore in FY23.

"Our restated loss in fiscal 2023 was primarily due to elevated operating expenses amounting to ₹3137 crore and employee benefits expense amounting to ₹1549 crore (including share based payment expense amounting to ₹630 crore), finance costs amounting to ₹681.5 crore and exceptional items amounting to ₹1,05 crore (primarily comprising severance related costs incurred in connection with workforce optimization initiatives, partially offset by reversal of share based payment expense which pertained to the same employees)," PRISM said in its IPO filing.

A "significant" increase in its operating expenses and cost base without a corresponding increase in revenue could materially affect its profitability and result in its incurring losses in the future, it added.

For its IPO, PRISM has proposed a fresh issue of equity shares worth up to ₹6,650 crore, with no offer-for-sale (OFS) component.

Existing investors, including SoftBank, Microsoft and Airbnb, are not expected to sell shares through the issue.

The company may also undertake a pre-IPO placement of up to ₹1,330 crore, which would reduce the size of the fresh issue if completed.

About ₹4,987.5 crore from the IPO proceeds has been earmarked for repaying or prepaying borrowings, with the remaining funds allocated for general corporate purposes. The move is expected to strengthen the company's balance sheet and lower its financing costs.

PRISM has reportedly generated ₹1,594 crore in cash from operating activities during the first nine months of FY26, compared with ₹321 crore in FY25. Before working capital adjustments, cash generated from operations stood at ₹2,011.5 crore during the period, as per a report by the Economic Times (ET).

The finance costs totalled ₹1,089 crore during the nine-month period, substantially exceeding the company's pre-tax profit, making debt reduction a key area of focus following the proposed listing.