In the 98-page long complaint Zo has mentioned that the IPO is non-maintainable as Oyo’s parent firm Oravel’s capital structure is not final.
Zostel Hospitality Pvt Ltd has filed a complaint with the Securities and Exchange Board of India (SEBI) seeking rejection of Softbank-backed Oyo’s initial public offering (IPO) proposal citing “misstatements” and “inadequate disclosures” in the draft red herring prospectus (DRHP) filed by them.In the 98-page long document Zostel has mentioned that the IPO is non-maintainable as Oyo’s parent firm Oravel’s capital structure is not final.The company has claimed that Oyo’s filing of the DRHP is illegal in view of the stipulation contained under Regulation 5(2) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).Moneycontrol reported on October 6 that Zo Rooms was planning to drag Oyo to SEBI on the grounds of violation of ICDR regulations alleging that the company had misrepresented the facts about their litigation issue in the DRHP.”Zostel’s shareholders have a right to get issued in their favour, 7% of the equity securities of Oravel. Oravel has failed to grant the same and hence is prohibited from making any public offer of its shares,” the company has said in the letter.”The DRHP is replete with material omissions and blatant misstatements, intended to mislead the public into investing into Oravel’s shares without appreciation of the risks involved,” it added.
This is the latest in the ongoing dispute between the two companies which dates back to 2015. Over half a decade ago, Zo Rooms, the budget hotel accommodation chain owned by Zostel Hospitality, was shut down after the merger talks between the two, which could have resulted in Zo Rooms getting a seven percent stake in Oyo, failed.
The two companies have been fighting the case since then.
In March, early this year, a Supreme Court-appointed arbitrator had finally said that Oyo was in breach of its agreement for the acquisition of Zo Rooms, adding that the latter can proceed to execute the definitive agreement.
Now reaching out to the Delhi High Court, Zo has stated that the award clearly stated that the term sheet between Oyo and Zostel was a binding contract which was breached by Oyo by not executing the definitive agreements and not transferring the seven percent shares to the shareholders of Zostel, as committed.
However, Oyo denies the claim stating that the tribunal had granted no specific relief to Zostel in terms of receiving ownership in Oyo.
Even in its DRHP, Oyo has stated that the “arbitrator did not pass any directions for issuance of shares of our company to the claimants.”
At a time when Oyo’s IPO talks got into the advanced stage, Zo reached out to the Delhi High Court seeking protection of its rights against the company.
On September 29, advocate Amit Sibal who was appearing on behalf of Zo Rooms, requested for their seven percent shares to be preserved till the next hearing, adding that Zo’s intention was not to stop Oyo’s initial public offering (IPO).
Sibal requested Justice C. Harishankar if the contested stake could be kept in escrow till the next hearing given that at that time Oyo was expected to file for an IPO.
However, this request was declined stating it couldn’t be done without hearing the “contested matter”.
Soon after that, Oyo filed its draft documents to raise $1.16 billion through a public offering on October 1.
