Zostel has approached the Securities and Exchange Board of India, urging the regulator to examine disclosures made by Oravel Stays, OYO’s parent operating under the brand PRISM, in its updated draft red herring prospectus filed ahead of its planned IPO. In a 56-page representation submitted on July 3, followed by a reminder on July 7, Zostel alleged that the offer document presents an incomplete account of its long-running legal dispute with OYO and asked SEBI to examine whether the disclosures meet completeness, fairness, and materiality standards under the SEBI Act and ICDR Regulations.
The dispute stems from a non-binding 2015 term sheet under which OYO proposed to acquire Zostel’s hotel business, with Zostel’s shareholders set to receive up to a 7% equity stake in OYO in return. The deal collapsed, leading to arbitration in 2018. A 2021 arbitral tribunal, headed by a former Chief Justice of India, ruled that OYO had breached the agreement, but the Delhi High Court later set aside that award in May 2025, holding that the term sheet was non-binding and did not create enforceable rights. The Supreme Court declined to entertain Zostel’s appeal against that ruling in July 2025.
Zostel maintains that appellate proceedings are still pending before the Delhi High Court and should be reflected in OYO’s IPO disclosures. A Zostel spokesperson confirmed the SEBI filing, clarifying that the company is seeking a review of the IPO disclosures rather than a determination of the underlying legal dispute. OYO has disputed Zostel’s claims.
On a parallel track, the Delhi High Court disposed of Zostel’s fresh application in the same dispute on July 10, with the underlying appeal now listed for hearing on August 12. PRISM’s draft prospectus itself discloses the litigation and warns that an adverse ruling could require the company to issue or transfer up to 7% of its share capital, or pay an equivalent amount, with potential implications for its business, financial condition, and shareholding structure.
OYO’s proposed IPO comprises a fresh issue of equity shares worth up to ₹6,650 crore, with no offer-for-sale component, meaning existing investors, including SoftBank’s SVF Holdings, Microsoft, Airbnb, and Peak XV Partners, will not dilute their stakes.
