Zostel has approached the Securities and Exchange Board of India (SEBI) to examine the disclosures provided by Oravel Stays, which is the parent company of Oyo, in its updated draft red herring prospectus (UDRHP) submitted for its intended initial public offering (IPO), as stated in a news report.
In a statement on 7 July, Zostel claimed that Oyo’s IPO filing presents a partial and selective overview of the ongoing legal conflict between the two firms, according to news reports.
It has requested that SEBI evaluate if the disclosures fulfil the requirements of completeness, fairness, and materiality outlined in the SEBI Act and the ICDR Regulations before permitting the IPO process to advance.
Zostel claimed in the report that the issue is not merely a typical commercial dispute, as it pertains to its claim on approximately 7% equity in Oyo, or the related economic value, stemming from the unsuccessful acquisition between the two companies. It argued that the outcome of the legal proceedings could affect Oyo’s capital structure, valuation, and investors’ evaluation of litigation risk, necessitating more comprehensive disclosure in the IPO documents.
Legal dispute stems from failed 2015 acquisition deal
The conflict began in 2015 when Oyo signed a non-binding term sheet to take over Zostel’s operations. In 2021, an arbitration tribunal ruled in favour of Zostel. However, the Delhi High Court later annulled the award, determining that the term sheet was non-binding and did not establish enforceable rights. In July 2025, the Supreme Court declined to consider Zostel’s appeal against the High Court’s decision.
As per the report, Zostel claims that appeals related to the dispute are still ongoing in the Delhi High Court and should be properly disclosed in Oyo’s IPO documents.
The representation further claimed that the UDRHP minimises the evidentiary record, misrepresents the core transaction, and fails to adequately outline the commercial importance of the ongoing proceedings. Zostel has requested that SEBI instruct Oyo to make necessary corrections or add disclosures, compel the book-running lead managers to conduct further due diligence, and consider permitting the IPO to proceed only after the disclosure issues are resolved.
Recently, Oyo submitted its revised draft red herring prospectus to SEBI with the intention of raising ₹6,650 crore through a new issue of equity shares, without including any offer-for-sale (OFS) component.
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