Budget accommodation platform Zostel has now approached the Securities and Exchange Board of India with a letter claiming that Oyo's IPO is "non-maintainable".
The letter was sent to Sebi on Monday, sources told CNBC TV 18. CNBC TV 18 has seen a copy of the letter. Zostel claims that Oyo's DRHP is "illegal" since it is in contravention of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018"
Reg 5(2) of SEBI ICDR regulations prohibits an IPO if any entity/person has rights that entitle them to receive shares of the issuer. Zostel claims it is due 7 percent shares in Oyo based on a term sheet between the two parties that was held as 'binding' by an arbitral tribunal in March this year. Oyo, however, has maintained that the arbitral award has not issued Zostel or any of its shareholders any shares in Oyo
In the letter to SEBI, Zostel has said that "the IPO is non-maintainable as Oravel’s capital structure is not final", and that the "DRHP is replete with material omissions and blatant misstatements, intended to mislead the public into investing in Oravel’s shares without an appreciation of the risks involved."
Oyo in a statement condemned Zostel’s move to approach SEBI, stating that "it was an attempt to overreach Delhi HC proceedings."
The company said that nothing in the Award prevents or restrains OYO from going ahead with the same, and added that the process was at the stage of exploratory discussions, and no definitive agreements were finalized or executed between the parties.
Zostel had earlier taken the matter to the Delhi High Court, which has adjourned the case to October 21. Zostel had moved the Delhi High Court late last month seeking to restrain Oyo from 'altering its shareholding pattern, including through an IPO' since it claims that an arbitral award it won in March this year grants Zostel's shareholders 7 percent shares of Oyo.
Oyo on October 1 filed its draft red herring prospectus (DRHP) with SEBI for raising Rs 8430 crore through an IPO. In the DRHP, Oyo has said that "an adverse outcome in legal proceedings involving Zostel may materially and adversely affect our business, reputation, prospects, results of operation and financial condition," and has gone on to say that the "arbitrator did not pass any directions for issuance of shares of the Company to the Claimants (Zostel)"
Oyo had in a blog post on September 28 accused Zostel of "forum hunting".
"Without considering the grounds of challenge by OYO of the Award, the Award in itself has not issued Zostel or any of its shareholders any shares in OYO. The only relief, apart from costs, which has been granted to Zostel, is to initiate “appropriate proceedings” to execute Definitive Agreements and seek specific performance of the Term Sheet. As such, till the time that parties do not come to an agreement on the terms of the Definitive Agreements and the same are not executed, no right whatsoever arises in favour of any party for any type of shares to be issued in OYO," the company said in the blog post.
First Published: IST