The conflict between Oyo and Zostel may be coming to an end now that Zo Rooms’ petition at the Delhi Court has been dismissed
- ByStartupStory | February 15, 2022
The interim petition filed by Zostel Hospitality Pvt Ltd, claiming a 7% stake in Oravel Stays Ltd, the parent company of Oyo, was dismissed by the Delhi High Court. This is a huge relief for the SoftBank-backed business, which has been waiting for regulatory permission for its $8.340 crore IPO filed last year. Justice C Hari Shankar of the Delhi High Court’s single-judge bench issued the decision on Monday.
The legal battle between the two firms began in 2015 when Oyo agreed to buy Zostel, which owns ZO Rooms and Zostel Hostels and is funded by Tiger Global. The agreement, however, fell through. After Oyo submitted draft papers for an initial public offering (IPO) with Sebi (Securities Exchange Board of India) in October 2021, Zostel appealed to Sebi urging it to reject Oyo’s prospectus and halt its IPO.
The capital structure of Oyo, according to Zostel, was not final at the time. It further claimed that Oyo’s draft documents had several major omissions and obvious misstatements, all of which were meant to fool the public into investing in Oravel’s stock without understanding the dangers involved.
An arbitration panel decided in Zostel’s favour in March 2021, declaring the term sheet that guaranteed ZO Rooms’ shareholders 7% of hospitality company Oyo a binding instrument. Oyo filed a petition with the Delhi High Court on April 10 last year, challenging the arbitral tribunal’s ruling and seeking a stay on the award’s execution. But In November of last year, Zostel Hospitality wrote to Sebi, alleging that Oyo misrepresented the legal facts’ and misled the authorities’ regarding the acquisition arrangement between the two companies.
Oyo’s IPO consists of a fresh offering of up to 7,000 crores worth of shares and a 1,430 crore offer-for-sale. SoftBank is looking for a partial exit through the IPO.
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