Zostel Hospitality Pvt. Ltd, on Monday, sent a 98-page letter to SEBI requesting to reject the draft prospectus filed by Oravel Stays Ltd, which operates brand Oyo, and suspend Oyo’s proposed initial public offering (IPO). Citing the reason for its request, Zostel said Oyo’s “IPO is non-maintainable as Oravel’s capital structure is not final”, The Economic Times reported.

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“Accordingly, Oravel’s filing of the DRHP in the circumstances is illegal, in view of the stipulation contained under Regulation 5(2) of the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements (ICDR) Regulations, 2018. Zostel’s shareholders have a right to get issued in their favour, 7% of the equity securities of Oravel. Oravel has failed to grant the same and hence is prohibited from making any public offer of its shares,” Zostel said in the letter.

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Meanwhile, Oyo has slammed Zostel’s action, calling it an “overreach” of Delhi High Court proceedings. Oyo stated that “nothing” in the arbitral judgment stops Oyo from proceeding with the IPO. The business went on to say that the process with Zostel was still in the early stages, with no concrete agreements in place.

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Zostel had previously brought the issue to the Delhi High Court, which had adjourned it until October 21. Zostel filed a petition in the Delhi High Court late last month, requesting that Oyo refrain from ‘altering its shareholding pattern, including through an IPO,’ claiming that an arbitral ruling it won in March of this year granted Zostel’s stockholders 7% of Oyo.

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Oyo filed its DRHP with SEBI on October 1 in order to raise Rs 8430 crore through an IPO. As one of the several risk factors mentioned in Oyo’s draft prospectus for the IPO, legal actions involving Zostel may substantially and adversely harm its operations.