Hospitality startup OYO is preparing for its third public listing while grappling with several legal issues, according to its draft red herring prospectus reviewed by medianama.com. The company faces human trafficking lawsuits in the US linked to its G6 Hospitality acquisition, an antitrust penalty from the Competition Commission of India (CCI), and a promoter-level tax dispute amounting to nearly Rs 1,690 crore. A critical legal battle involves Zostel, which claims a 7% equity stake in OYO.
Zostel is contesting a Delhi High Court ruling that set aside an arbitral award granting it 7% of OYO’s shares. The dispute is scheduled for a hearing on July 8. If Zostel obtains a non-appealable order, OYO may have to transfer either the equity stake or its cash equivalent, potentially affecting its ownership and financial position. Additionally, OYO disclosed a First Information Report (FIR) filed in Varanasi last October against some employees under the Immoral Traffic (Prevention) Act, adding to its legal challenges.
These legal issues come at a sensitive time as OYO seeks to raise capital through its IPO. The antitrust penalty from the CCI and the large tax dispute further complicate the company’s financial outlook. The Zostel case, in particular, could impact investor confidence due to the possibility of dilution or cash outflow. OYO’s ongoing human trafficking allegations in the US also pose reputational risks that may affect its market perception post-listing.
The next key date is July 8, when the Delhi High Court will hear the Zostel dispute. The outcome could significantly influence OYO’s shareholding structure and cash reserves just before its IPO. The company’s draft prospectus highlights these challenges as material risks to potential investors.