Softbank-backed Oyo in legal dispute with rival Zostel ahead of $ 1.2 billion IPO

Sept. 29 (Reuters) – Oyo Hotels and Rooms, backed by SoftBank Group (9984.T), faces a legal battle with rival Zostel ahead of its $ 1.2 billion market debut following a agreement between the two Indian hotel startups which collapsed six years since.

Oyo is seeking to raise between $ 1 billion and $ 1.2 billion through a new share issue and an offer to sell from existing shareholders. The company is expected to file draft initial public offering documents this month, Reuters reported last week, joining a wave of Indian startups seeking to go public this year. Read more

But Zostel filed a petition in August with the Delhi High Court to prevent Oyo from changing its shareholder structure, including through an IPO, the petition said, seen by Reuters.

Their 2015 agreement called for Oyo to buy out some of Zostel’s businesses, while Zostel would get a 7% stake in Oyo. The deal collapsed, but the companies are in a long-standing legal battle over the terms, with Oyo arguing they had not reached a definitive deal.

In 2018, the Indian Supreme Court appointed an arbitrator in the case, which in March this year ruled that the terms of the deal were binding and that Zostel was entitled to claim the 7% stake in Oyo.

Zostel “did everything in his power to fulfill his obligations” while Oyo defaulted on his obligations by failing to execute a final agreement, the arbitrator said.

Oyo challenged the arbitration order in the Delhi High Court.

A legal adviser from Oyo said in a statement to Reuters on Wednesday: “[Un]Until the parties can reach an agreement on the terms of the definitive agreements and these are not executed, no rights exist in favor of a party for any type of shares to be issued in Oyo. .

Zostel opposes any attempt by Oyo to change its shareholding structure, Zostel co-founder Paavan Nanda said in a response to Reuters.

Oyo’s attorneys in court on Wednesday opposed requests by Zostel’s attorney to retain the disputed 7% stake in the escrow. The judge rejected that request and set a date of October 7 for a detailed hearing of the case.

Since its launch in 2013 by CEO Ritesh Agarwal, Oyo has grown rapidly, competing with US home rental company Airbnb and local chains such as Fab Hotels and Treebo.

It operates in 35 countries, including India, Europe and Indonesia, and counts Sequoia Capital and Lightspeed Venture Partners among its other investors.

Reporting by Chandini Monappa and Vishwadha Chander in Bengaluru and Abhirup Roy in Mumbai. Editing by Jane Merriman

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