Oyo denies all charges by Zostel about failed buyout deal in letter

Oravel Stays, parent of Oyo has written to the market regulator refuting all the allegations made by Zostel Hospitality. Zostel had written to the Securities and Exchange Board of India (Sebi) to reject Oyo’s draft red herring proposal.

In a letter to Zostel that Business Standard has viewed, Oyo said: “We deny in toto all the allegations levelled by you against us in the Complaint. The Complaint is replete with patently false statements and self-serving half-truths, and is a deplorable attempt to adversely impact the proposed Offer and coerce the Company into granting Zostel’s shareholders an entitlement to shareholding in the company that they failed to obtain in the arbitration proceedings between Zostel, its founders and shareholders and the company and the arbitral award dated March 6, 2021, issued by the sole arbitrator, Justice A M Ahmadi (Retd).”

On October 11, Zostel has written to Sebi and said “the IPO is non-maintainable as Oravel’s capital structure is not final.”

In the response to Zostel, Oyo further stated, “The capital structure of the company is firm and accurately reflectied in the DRHP. As of date there are no shares to be issues to Zostel’s shareholders as the Award does not direct issuance of the company’s shares to the shareholders of Zostel.”

The root of the dispute between the two parties lies in a failed buyout deal six years ago, which Zostel claims was binding on Oyo.

Oyo mentions in the letter that both the parties—Oyo & Zostel—had mutually agreed to terminate the agreement. “…terminated by Zostel pursuant to email dated September 17, 2016 and agreed to by the company pursuant to email dated September 19, 2016. Both parties commenced negotiations on new terms, which were never finalised.”

Zostel confirmed the receipt of the letter. It did not immediately respond to a request for comment.

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