The court order, dated March 14 which has been reviewed by ET, also directed Oyo to inform markets regulator Sebi (Securities and Exchanges board of India) about this latest order of the division bench of Delhi HC. The SoftBank-backed hospitality startup has taken the undertaking for the same as well, it noted.
The bench, which was hearing Zostel’s appeal against the interim relief given by a single judge — in February — to
Oyo Hotels & Homes to go ahead with its plan for a public listing, said it has taken cognisance of prayers by both parties who have also agreed a consensual order should be passed while disposing the appeal by Zostel.
The order did not specifically mention how the value of 7% of Oyo will be arrived at.
While Oyo has previously denied Zostel’s claim to 7% stake in its parent company, the consensual order notes that if Zostel wins its case, it stands to gain up to 7% in the Oyo parent — which was last valued at $9.5 billion in September 2021 following an investment from Microsoft.
Zostel’s appeal for an interim relief to stop Oyo from moving ahead with its IPO was dismissed last month, following which it had filed an appeal with the division bench contesting the ruling.
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A spokesperson for Oyo did not comment on court proceedings. Zostel’s legal counsel also declined to comment on the matter.
Disputed buyout
The two companies have been fighting in court over Zostel’s claim of a 7% holding in Oyo due to an acquisition gone awry over six years ago. Gurgaon-based Oyo has rejected the claim.
Last year, Supreme Court-appointed arbitrator AM Ahmadi, a former Chief Justice of India, in his order of March 2021 had said that
Oyo was in breach of its agreement with smaller rival Zostel over the proposed buyout.
He had said the term sheet between Oyo and Zostel was binding and that Oyo, after a point, had stopped taking steps to fulfil obligations under the term sheet.
Since the dispute landed in court, Oyo has maintained that the disputed term sheet was non-binding. Oyo has also challenged the arbitrator’s order.
On its part, Zostel has also filed a plea to enforce the arbitrator’s award.
Now, these two matters will continue to be heard, going forward with a single judge at the Delhi HC. The next hearing is expected later next month.
Notify the regulator
While Zostel has previously written to Sebi about its dispute with Oyo, this is the first time that a court has directed that the regulator be informed about the dispute and where Oyo has taken an undertaking to comply.
The court also ordered that Zostel should not notify any statutory authority about the March 14 order.
The latest order comes when
Oyo is still waiting for a clearance on its IPO proposal from Sebi and is also considering reducing its offer size to below $1 billion, as first reported by ET.
A Bloomberg report on Friday said Oyo was considering slashing its IPO size by as much as 50% and may even shelve the proposed IPO for which the regulator’s approval is pending.
In response to a query on the Bloomberg report, Oyo said it strongly denies the assertion that the company is either shelving the IPO or changing valuations dramatically. “The company continues to receive investor interest as we await approval from the regulator,” it said.
ET reported on February 10 that Oyo is planning to reduce the size of its (IPO), with a significant cut in its offer for sale (OFS) component, in view of adverse secondary market conditions and a crash in stock prices of new-age tech startups.
It remains to be seen when Oyo’s IPO proposal is cleared and what valuation it can fetch in a listing amid a global correction in valuation of new-age technology companies.
On September 28, when ET broke the news of Zostel’s interim plea, Oyo’s legal counsel at the time told ET that the petition by Zostel had been filed “seeking reliefs which are beyond the scope of the (arbitration) award”.
“The award does not provide any relief to Zostel or its shareholders that entitles them to seek Oyo to freeze its shareholding pattern, in any manner whatsoever. Oyo’s stand is that this petition is not maintainable and in any case without merit,” the counsel had said at the time.
The company has also made changes in its top management and said it ‘elevated’ its India and Southeast Asia (SEA) CEO Rohit Kapoor to the role of global CMO while Ankit Gupta has been made the India CEO along with Ankit Tandon being made SEA and Middle East chief.
