Skift Take
Legal disagreements with rival Zostel is the latest example of it being anything but smooth sailing for Oyo’s path to going public.
Cameron Sperance
SoftBank Group-backed Oyo Hotels and Rooms is facing a legal tussle with rival Zostel ahead of its approximately $1.2 billion market debut over a deal between the two Indian hospitality start-ups that broke down 6 years ago.
Oyo is wanting to raise in between $1 billion and $1.2 billion through a brand-new share problem and an offer for sale from existing investors. The company is set to file draft going public documents this month, Reuters reported recently, joining a wave of Indian start-ups seeking to go public this year.
But Zostel submitted a petition in August with the Delhi High Court to stop Oyo from changing its shareholder structure, consisting of through an IPO, the petition, seen by Reuters, said.
Their 2015 deal was for Oyo to buy some of Zostel’s organizations, while Zostel would get a 7% stake in Oyo. The deal fell apart but the business have actually remained in a long-running legal battle over the terms, with Oyo arguing that they had actually not reached a conclusive agreement.
In 2018, India’s Supreme Court selected an arbitrator on the case, who in March this year ruled that the terms of the deal were binding and Zostel was entitled to claim the 7% stake in Oyo.
Zostel “did whatever within their control to complete their commitments” while Oyo breached its responsibilities by failing to carry out a definitive contract, the arbitrator said.
Oyo has actually challenged the arbitration order in the Delhi High Court.
A legal counsel for Oyo said in a declaration to Reuters on Wednesday:” til the time that celebrations do not pertain to a contract on the terms of the conclusive contracts and the same are not performed, no ideal whatsoever emerges in favour of any celebration for any kind of shares to be released in Oyo.”
Zostel is opposing any attempt by Oyo to change its shareholding structure, Paavan Nanda, Zostel co-founder, said in an action to Reuters.
Oyo’s attorneys in the court on Wednesday objected to requests from Zostel’s counsel to keep the contested 7% stake in escrow. The judge declined this demand and set an Oct. 7 date for a detailed hearing of the case.
Because its launch in 2013 by CEO Ritesh Agarwal, Oyo has proliferated, taking on U.S. house rental business Airbnb and house grown chains such as Fab Hotels and Treebo.
It runs operations in 35 countries, including India, Europe and Indonesia, and counts Sequoia Capital and Lightspeed Venture Partners among its other investors.
(Reporting by Chandini Monappa and Vishwadha Chander in Bengaluru and Abhirup Roy in Mumbai. Editing by Jane Merriman)
This short article was composed by Vishwadha Chander and Abhirup Roy from Reuters and was lawfully accredited through the Market Dive publisher network. Please direct all licensing questions to [e-mail safeguarded]