OYO versus Zostel: SoftBank-backed hospitality giant refutes allegations

New Delhi: OYO's parent firm Oravel Stays has refuted all 'allegations' made by Zostel Hospitality, which had requested the markets regulator Sebi to reject the draft red herring prospectus filed by OYO for its initial public offering.

In a letter to the Securities and Exchange Board of India on October 11, 2021, Zostel had said "the IPO is non-maintainable as Oravel's capital structure is not final" and accordingly "Oravel's filing of the DRHP (Draft Red Herring Prospectus) in the circumstances, is illegal..."

The DRHP is replete with material omissions and blatant misstatements, intended to mislead the public to invest in Oravel's shares without an appreciation of the risks involved, it had added.

In a letter to Zostel, accessed by PTI, OYO said, "...We deny in toto all the allegations levelled by you against us in the Complaint. The Complaint is replete with patently false statements and self-serving half-truths, and is a deplorable attempt to adversely impact the proposed Offer and coerce the Company into granting Zostel's shareholders an entitlement to shareholding in the company that they failed to obtain in the arbitration proceedings between Zostel, its founders and shareholders and the company and the arbitral award dated March 6, 2021, issued by the sole arbitrator, Justice AM Ahmadi (Retd.)".

The company has made adequate disclosures required under the applicable law in the DRHP filed with Sebi. No reasons or grounds, whatsoever, have been made out by you, warranting consideration of rejection of the DRHP or suspension of the proposed offer, it added.

"The capital structure of the Company is firm and accurately reflected in the DRHP. As on date, there are no shares due to be issued to Zostel's shareholders as the Award does not direct issuance of the Company's shares to the shareholders of Zostel," the letter said.

All outstanding litigation required to be disclosed in accordance with the ICDR Regulations and the materiality policy adopted by the board of directors of the company in relation to outstanding litigation, involving the company, its subsidiaries, its promoters and its directors have been disclosed in the DRHP, it added.

Further, this matter has been disclosed in the section “Outstanding Litigation and Material Developments - Litigation involving our Company - Material litigation against our Company” of the DRHP. A risk factor in relation to the matter has also been disclosed in the DRHP, OYO said.

"...The DRHP contains adequate disclosures of all pending litigations, in compliance with the disclosure obligations under the ICDR Regulations,” it added.

The DRHP or the proposed offer do not infringe upon or violate the terms of the Award or any judicial or quasi-judicial pronouncements. Adequate information and disclosures have been provided in the DRHP for the potential investors to make an informed decision in respect of investment in the equity shares and the proposed offer, OYO said.

Comments from Zostel Hospitality Pvt Ltd could not be obtained at the time of filing the story. Also Read: Sapphire Foods IPO: KFC, Pizza Hut operator to open offer on November 9

Zostel and OYO are involved in a legal battle over a deal between the two companies in 2015. Also Read: Combined Index of Eight Core Industries stood at 126.7 in September 2021