Softbank-backed Oyo in legal spat with rival Zostel ahead of $1.2-billion IPO By Reuters
By Vishwadha Chander and Abhirup Roy
(Reuters) – SoftBank Group-backed Oyo Hotels and Rooms is facing a legal tussle with rival Zostel ahead of its up to $1.2 billion market debut over a deal between the two Indian hospitality startups that fell apart six years ago.
Oyo seeks to raise $1 billion to $1.2 billion via a share sale and a new issue. Reuters last week reported that the company will file its draft documents for an initial public offering. This follows a number of Indian start-ups seeking to become public in this year’s Indian financial crisis.
Zostel had filed a petition to the Delhi High Court last August in order to block Oyo changing its shareholder structure. This petition was also seen by Reuters.
Oyo would buy some Zostel businesses while Zostel would receive a 7% share in Oyo. Oyo, however, claimed they hadn’t reached a final agreement and the transaction was canceled.
The Indian Supreme Court appointed an arbitrator to the case in 2018. He ruled in March 2018 that the terms were legally binding, and Zostel could claim the remaining 7% of Oyo.
According to the arbitrator, Zostel did “everything within their power to meet their obligations”, while Oyo broke its commitments by not executing a definitive agreement.
Oyo challenged the arbitrator’s order at the Delhi High Court.
A legal counsel for Oyo said in a statement to Reuters on Wednesday: “[Un]til 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.”
Zostel opposes any attempts by Oyo alter its shareholding structure. Paavan Naanda, co-founder of Zostel, stated in a reply to Reuters.
Oyo’s lawyers were present in court Wednesday to object to Zostel’s request to maintain the contest 7% share in escrow. This request was denied by the judge who set Oct. 7 as the date for detailed hearing.
Oyo, which was founded by Ritesh Agarwal in 2013, has seen rapid growth. It competes with U.S.-based home rental company Airbnb, as well as homegrown chains like Fab Hotels or Treebo.
Oyo has operations in 35 different countries including India, Europe, and Indonesia and also counts Sequoia Capital as one of its investors.
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