Zo Rooms claims that the demerger will affect the claim sought by it in the ongoing arbitration, contesting a 7% stake in Oyo’s parent Oravel Stays.

Zo Rooms files plea in Delhi HC against OYOs business restructuring
Atom OYO Wednesday, January 29, 2020 - 10:42

With OYO set to restructure its business as directed by its majority shareholder SoftBank, Zo Rooms has filed a suit in the Delhi High Court against the restructuring. OYO has done some restructuring in its operations whereby parts of the business of Oravel Stays have gone to Oyo Hotels and Homes and some to Oravel Stays Singapore.

As per an Economic Times report, Zo Rooms says the restructuring and shifting of businesses from one entity to another has been done without the arbitrator or Zo Rooms being informed. Zo Rooms’ contention is that the demerger could greatly affect Zo’s claim in their current court battle where it is contesting a 7% stake in parent Oravel Stays. Hence it wants it to be stopped. Moreover, it could affect the value of the 7% stake it is contesting.

“If Oravel Stays is valued at $5 billion, a 7% stake would be valued at $350 million and, at a lower valuation, the same stake would be of less value,’ the ET report states.

Delhi HC has directed OYO to file its response to the plea by Zo Rooms.

The companies were to merge with each other, but the discussions did not succeed. The matter has gone into arbitration with a former Chief Justice of India, Justice AM Ahmadi as the Supreme Court appointed arbitrator.

In order to make the process more transparent and for it to have some say in it, Zo Rooms has asked the Delhi High Court to include Oyo Hotels and Homes as well as Oravel Stays Singapore in the arbitration process. Since the original dispute was between Zo Rooms and Oravel Stays, they are only represented on the arbitration table. Zo Rooms claims the changes being unilaterally made by Oyo can damage the ultimate value it an get for its 7% stake and hence this case in the HC.

Oyo has not directly responded to the issue at hand but told ET that the restructuring exercise was done in a transparent manner with newspaper advertisements being released in newspapers. The hospitality major has also said the restructuring will not affect the value of the company.

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