Zostel asks SEBI to Reject OYO’s $1.2 billion IPO

Why Zostel has a problem with OYO IPO

by 5paisa Research Team Last Updated: Dec 14, 2022 - 04:06 pm 50.2k Views
Listen icon

As Oravel Stays, the company that owns and operates the OYO brand, gets set for its Rs.8,430 crore IPO, it is likely to face a roadblock from a 6 year old deal that had failed. This pertains to the proposed acquisition of Zostel and Zo Rooms by OYO in 2015. The deal finally fell through and subsequent to that Zostel had to shut down its business. Now Zostel has written to SEBI about the breach of terms by OYO.

Check - Oravel Stays (OYO) Files for Rs.8,430 Crore IPO

According to the letter written by Zostel to SEBI, OYO was required to transfer 7% of the equity to Zostel shareholders as part of the agreement. The agreement had also included a clause that till that agreement was executed, OYO would not be permitted to alter its capital structure. Zostel has alleged that this IPO, which was a combination of fresh issue and an offer for sale, was a clear alteration of capital.

In its letter to SEBI, Zostel has underlined that the IPO of Oravel Stays was in contravention of the ICDR regulations as OYO had not met the conditions for alteration of capital. Zostel also alleged that the investment bankers to the issue had done inadequate due diligence in putting up the IPO proposal to SEBI for approval.

Zostel and OYO have been fighting a pitched legal battle since the last 6 years. In Mar-21, a Supreme Court appointed arbitrator had ruled that OYO was in breach of the agreement for the acquisition of Zostel. It also added that Zostel was entitled to go ahead and execute the definitive agreement giving it legal sanction.

This arbitration order was challenged by OYO in the Delhi High Court and in response Zostel had filed an execution petition and a petition to restrain OYO from going ahead with the IPO. Zostel has already sent a notice to OYO to enforce the award which includes the transfer of 7% of shares of the current capital to the shareholders of Zostel. The case is coming up for hearing in the Delhi High Court on 21-Oct.

While OYO has dismissed these claims of Zostel as being fictitious, SEBI is likely to be wary of approving the DRHP if there are pending legal orders pertaining to the essence of the IPO. It looks like challenging times for OYO in the days ahead.

Also Read:-

OYO IPO - 7 Things to Know About

Upcoming IPOs in 2021

List of Upcoming IPOs in October 2021

How do you rate this blog?

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

oda_gif_reasons_colorful

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Enjoy 0%* Brokerage with 5paisa
Resend OTP
Please Enter OTP
Mobile No. belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Swing Trading Stocks: Week of 01 April 2024

Swing Trading Stocks for the Week

Weekly Market Outlook for 1st April to 5th April

The week gone by was a truncated week of three trading sessions, but it was not short of any action as the index witnessed a smart recovery in three days. Nifty almost tested the previous all-time high above 22500 on the expiry day and ended just above 22300 with weekly gains of a percent.

Stock in Action – Bajaj Finance

Bajaj Finance Movement of Day