Hospitality startup OYO is taking a third stab at a public listing. But if you look closely at its draft prospectus, you’ll realise that OYO is embroiled in a series of legal troubles. The company is facing multiple human trafficking lawsuits in the US following its acquisition of G6 Hospitality, an antitrust penalty imposed by the Competition Commission of India (CCI), and a promoter-level tax dispute running into nearly Rs 1,690 crore.
And perhaps its biggest battle is against Zostel, which is gunning for a 7% equity stake in OYO. Read our full coverage of Zostel’s dispute with OYO here.
To be sure, Zostel has challenged the Delhi High Court ruling that set aside an arbitral award entitling the company to a 7% stake in OYO. The matter is next listed for hearing on July 8 (next week).
Why does it matter? Because if Zostel secures a non-appealable order from the court, OYO may be forced to transfer 7% of its shareholding, or the cash equivalent, to Zostel. Either way, this could drain OYO’s cash reserves, impact its ownership structure and financials, and cause reputational damage soon after listing.
Other legal battles OYO is fighting:
1. Trafficking-related FIR in UP: OYO disclosed that a First Information Report (FIR) had been filed in Varanasi against certain employees of Oyo Hotels and Homes last October under multiple provisions of the Immoral Traffic (Prevention) Act.
The case has been registered under Sections 3 (keeping a brothel or allowing premises to be used as a brothel), 4 (living on the earnings of prostitution), 5 (procuring, inducing or taking a person for the purpose of prostitution), 6 (detaining a person in premises where prostitution is carried on), and 7 (prostitution in or in the vicinity of public places).
Following a complaint from a senior police official, authorities sealed a Town House hotel in the Cantonment area.
OYO has moved the Allahabad High Court against lockdown of hotel premises, alleging: “The aforesaid locking/seizure of the hotel premises is challenged on grounds of it allegedly being undertaken arbitrarily and illegally without following due process under the Immoral Traffic (Prevention) Act, 1956.”
2. Rs 168 crore antitrust penalty still hanging in the balance: OYO’s appeal against the CCI order imposing a Rs 168.8 crore penalty for engaging in anti-competitive practices remains pending before the National Company Law Appellate Tribunal (NCLAT).
The case dates back to 2019, when the Federation of Hotel and Restaurant Associations of India (FHRAI) approached the CCI, alleging that the agreement between OYO, MakeMyTrip, and Goibibo (MMT-Go) was anti-competitive. Subsequently, FabHotels filed a complaint with the antitrust regulator, alleging that MMT-Go abused its dominant market position and gave OYO preferential treatment by delisting FabHotels properties from its portals after striking a deal with OYO. Treebo levelled similar allegations against…
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