After Zostel, FHRAI moves SEBI; seeks suspension of OYO IPO

The Federation of Hotels and Restaurant Association of India (FHRAI) has moved a petition before the Securities Exchange Board of India (SEBI), seeking the suspension of hospitality chain OYO’s $1.2-billion IPO.

This comes after Zostel (Zo Rooms) moved the SEBI, alleging OYO hasn’t made adequate disclosures in its Draft Red Herring Prospectus (DRHP).

OYO, however, claimed it has made adequate disclosures in its filing. Sources said OYO’s IPO is well on its course with the markets regulator’s website showing the filing is “under process”.

Meanwhile, a fresh petition by FHRAI has alleged that OYO is engaged in “anticompetitive business practices”. The petition said OYO is being allowed to list on the stock exchanges and raise money from public investors, which is a risk to interests.

In its DRHP, OYO said FHRAI had earlier petitioned before the Competition Commission of India (CCI), alleging an agreement between OYO and Make My Trip. FHRAI, as per OYO, had alleged the agreement breached several provisions of the competition act, following which the CCI ordered an investigation on October 28, 2019.

The FHRAI petition said OYO hasn’t specified all the litigations pending against it in its DRHP, which can have a cumulative impact on the business and that they should have been adequately disclosed.

FHRAI has alleged that OYO’s various subsidiaries, which have the same business, have not been named in the DRHP. It said there is no disclosure of the audited financial results of the group companies.

The federation also questioned the hospitality start-up’s valuation worth Rs 8,430 crore that, it said, doesn’t reflect OYO’s financial health. “For a company which has incurred losses successively since its inception, the valuation so arrived at DRHP isn’t feasible,” FHRAI claimed.

OYO had earlier said: “We strongly condemn the ill-informed, manufactured and baseless lies and allegations about inadequate disclosures in our DRHP. FHRAI member hotels must demand accuracy and accountability from their office bearers about the falsehoods they are propagating. FHRAI has assumed that no one will verify the accuracy of their claims by cross-checking existing disclosure in the DRHP.”

OYO said it has been “very transparent” in disclosing all material cases and disputes it’s facing in absolute adherence with the regulations.

“We have worked hard over the last two years to take partner feedback and make our policies and practices partner friendly. Today, OYO has a thriving and satisfied partner ecosystem. In 2021, our hotel partner satisfaction scores have increased substantially on the back of our engagement and industry-first revenue initiatives such as Discover OYO, VaccinAid, etc.”

OYO said its partners have benefited from a strong organic and repeat demand from its customer base. “We conduct town-halls with them frequently for feedback and to collectively come up with plans for enabling demand recovery. We request FHRAI to help enable the recovery of the industry and to not spread false and inappropriate allegations,” the company said.

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