Budget hotel accommodation company Zostel is set to approach the Securities and Exchange Board of India (Sebi) against OYO and the latter's IPO plans, claiming 'gross misrepresentations made in the draft red herring prospectus (DRHP)'.
The letter to Sebi will be sent this week, legal representatives of Zostel told CNBC-TV18. This comes after the Delhi High Court adjourned the Zostel vs OYO 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. However, OYO has filed an appeal against the award and claims that ward in itself has not issued Zostel or any of its shareholders any shares in OYO.
OYO on October 1 filed its DRHP with Sebi for raising Rs 8,430 crore through an IPO. In the DRHP, OYO has said "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)."
Zostel, however, is set to move Sebi stating misrepresentation in the DRHP.
"The case has been going on since 2018 and our focus was to bring to Sebi’s attention the documents filed by OYO. The DRHP that has been issued is in violation of regulation 5(2) which is what we've been saying all along. However, now that the DRHP is out, we have noticed that there are gross misstatements and misrepresentations made in the DRHP regarding our case and that's what we're going to highlight in addition to the violation of 5(2) in our letter to Sebi," the Zostel counsel said in a statement.
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"OYO's attempt to file the DRHP is in contravention of Regulation 5(2) of the Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2018, as per which, an IPO cannot take place if any person/entity has a right that would entitle such person/entity to receive shares after the IPO. In this case, the arbitrator’s award has allowed Zostel’s claim to get 7 percent of shares in OYO. These are yet to be allotted by OYO since they have challenged the award. However, there is no stay of the award. Thus, Zostel and its shareholders are entitled to get these shares," the counsel added.
OYO did not share a response for this story, but in a blog post on September 28, the company had 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.
(Edited by : Jomy Jos Pullokaran)
First Published: IST