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The battle between tech hospitality major OYO and hostel chain Zostel reached another high, as IPO-bound OYO published an open blog in response to a letter by Zostel threatening it to constrain its IPO readiness actions.

According to the letter in possession of IANS, the hostel chain has threatened that it "shall be constrained to write to SEBI and/or initiate appropriate proceedings against OYO & OHHPL".

Zostel has also said that its shareholders are entitled to 7 per cent mirror-image shareholding in the OHHPL (Oyo Hotels and Homes Private Ltd) as per the terms of the scheme of demerger of OYO's (Oravel Stays Private Ltd) "Indian Business" into the OHHPL -- approved by the NCLT Ahmedabad -- so any market offer should only follow implementation of this scheme.

While OYO has hit back via its counsel's statement in an open blog, claiming "The petition filed by Zostel seeks reliefs which are beyond the scope of the Award. The Award does not provide any relief that entitles them to seek to freeze OYO's shareholding pattern, in any manner whatsoever. As such, till the time that parties do not come to an agreement on the terms of the Definitive Agreements and the same are not executed, no right whatsoever arises in favour of any party for any type of shares to be issued in OYO."

IANS had reported in March 2021 about the stretched battle between OYO and Zostel in which the companies are at loggerheads over an arbitration award. OYO's contention that the Arbitration Tribunal adjudicating the dispute between two entities has granted no specific relief to Zostel in terms of receiving ownership in the hospitality major. This was a result of OYO calling off its acquisition of Zo Rooms citing inability to reach an outcome to identify potential value in Zo's business after thorough due diligence.

Zostel has claimed in its letter that it "is astonished to find that OYO is proceeding to make a public offering of shares without complying with the terms of the Award and allotting to the Shareholders the shareholding to which they are entitled".

In response, OYO has stated in its blog that it "condemns Zostel's self-serving misrepresentation of case facts and it is an attempt to overreach Delhi HC proceedings. After multiple attempts in the courts and arbitration tribunal, Zostel has continued its efforts to create a wrong perception. This shows a pattern of Zostel trying to distract the company from pursuing its business goals".

The company goes on to add that "since 2016, immediately after the merger talks were called off, Zostel and its directors have used multiple tactics, from sending letters carrying false allegations to OYO's management to writing to shareholders, for intimidating and pressurizing us to submit to their unreasonable demands. OYO has also been given to believe that Zostel has approached potential investors, falsely claiming that it is entitled to a stake in OYO".

Zostel's letter seems to be a part of a recent trend of claims being raised on IPO bound companies.

The most recent instance has been of an investor laying claim to a large shareholding in Paytm. The company was quick to clarify that the claims had no merits and were not supported by any concrete documentation.