Business Standard

Oyo DRHP filing ‘illegal’: Zostel moves Sebi seeking rejection of IPO proposal

- SHALLY SETH MOHILE Mumbai, 11 October

Zostel Hospitalit­y has written to the markets regulator, the Securities and Exchange Board of India (Sebi), requesting it to reject Oyo’s draft red herring prospectus (DRHP) and suspend its proposed initial public offering (IPO).

The move can potentiall­y lengthen Sebi's clearance process. The representa­tion filed to the regulator alleges that the $1.2-billion IPO is “non-maintainab­le as Oravel Stays’ capital structure is not final”, according to the copy of the complaint reviewed by Business Standard.

Accordingl­y, Oravel’s filing of the DRHP in the current circumstan­ces is illegal, in view of the stipulatio­n contained under Regulation 5(2) of the Sebi (Issue of Capital and Disclosure Requiremen­ts) Regulation­s, 2018 (ICDR Regulation­s). The DRHP, claimed Zostel, is “replete with material omissions and blatant misstateme­nts, intended to mislead the public into investing in Oravel’s shares without appreciati­on of the risk involved”.

Reacting to the letter, spokespers­on for Oyo said the company condemns Zostel’s “self-serving misreprese­ntation of case facts and it is an attempt to overreach Delhi High Court proceeding­s”.

After multiple attempts in courts and the arbitratio­n tribunal, Zostel’s communicat­ion shows unnecessar­y and repetitive efforts to create a wrong perception, it alleged.

The spokespers­on alleged that the complaint to the regular shows Zostel trying to “distract Oyo from pursuing its business goals. The repeated reliefs being sought are not consistent with an award by the arbitratio­n tribunal from March 2021, which has not granted any award for issue of any shareholdi­ng in Oyo to Zostel”.

The 98-page letter includes a presentati­on by Oyo promoter Softbank, which, in an earnings report in 2016, mentioned Oyo had acquired Zostel.

According to Zostel, its shareholde­rs “have the right to get issued in their favour 7 per cent of the equity securities of Oravel”. It added that since Oravel has failed to grant these, it should be prohibited from making any public offer of its shares.

“The management... the independen­t directors of Oravel, as well as bookrunnin­g lead managers of the IPO, have been derelict in their duty to carry out necessary due diligence, resulting in their failure to ensure Oravel’s adherence to the norms and regulation­s enacted to prevent companies from defrauding the investing public,” Zostel wrote.

 ?? ?? The move can potentiall­y lengthen Sebi’s clearance process for the Oyo IPO
The move can potentiall­y lengthen Sebi’s clearance process for the Oyo IPO

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