Delhi HC rejects Zostel’s appeal for 7% stake in IPO-bound OYO

 In a major relief to IPO-bound hospitality chain OYO, the Delhi High Court has rejected an appeal of the chain’s smaller rival, Zostel for granting a 7 per cent stake in OYO. OYO’s spokesperson confirmed to Business Today that the Delhi High court has granted the decision in the company’s favour. The Delhi HC observed that the 7 per cent equity was never awarded to Zostel and that the firm “has no fruit to protect its 7 per cent equity but has the right to seek specific performance under the term sheet between the two companies."

The Delhi HC further said that it found no merits in the petition filed by Zostel seeking a stay on the upcoming IPO of OYO. Zostel had earlier filed a petition before the court seeking to prevent the Ritesh Agarwal-led hospitality chain from listing on stock exchanges arguing that it could alter the shareholding pattern of the company.

The issue pertains to a 2015 proposed deal centering around Zostel’s acquisition of OYO, which, if concluded, would have resulted in Zostel acquiring a 7 per cent stake in OYO. The deal was not implemented after a minority investor in OYO objected to the buyout.

Zostel, on the other hand, alleged that OYO, after signing the term sheet in November 2016, sent a series of documents to the former agreeing upon the conditions of the contract, asking for details of employees and operations and, finally, not signing the definitive agreement.

OYO which had earlier approached the Delhi HC challenging the award, has maintained that there was no transfer of assets between the companies, no definitive agreement was signed and that the hospitality chain backed out of the deal after carrying out due-diligence.

OYO is awaiting the nod from the market regulator SEBI for its $1.2 billion IPO, one of the largest public listing by a new-age firm this year. Sources had told BT earlier that the public listing is on track and that there the process of the market regulator raising objects to its DRHP is also over.