The Federation of Hotel and Restaurant Association of India (FHRAI) is the latest entity to write to market watchdog Securities and Exchange Board of India (Sebi), urging it to suspend hospitality unicorn Oravel Stays Pvt.Ltd.'s (Oyo's) upcoming inital public offering (IPO), for not making adequate disclosures in its draft prospectus.
The hospitality body, which counts more than 50,000 hotels as members, alleged that Oyo has failed to make relevant disclosures around its ongoing investigation by Competition Commission of India (CCI), as well as failed to disclose the consequences of pending litigations against its subsidiaries.
“The DRHP filed by Oravel fails to disclose that there has been no stay on the prima facie findings of the CCI that Oravel violated the provisions of the Competition Act nor is there any stay on the investigation initiated by the Director General in relation to the same,” said FHRAI in a letter to SEBI on October 22.
FHRAI claimed that the investigation of the Director General remains pending and is known to be at an advanced stage.
“Instead, of making a fair disclosure on the nature and consequence of the CCI directed investigation, Oravel, in its DRHP, has tried to confound investors by conflating irrelevant issues relating to the interim reliefs sought by RubTub Solutions Private Limited (“Treebo”) and Casa2Stays Private Limited (“FabHotels”),” added FHRAI in its request to SEBI.
Mint has reviewed a copy of the letter sent by FHRAI to Sebi.
Earlier in October 2019 and February 2020, CCI acted on FHRAI’s and Treebo complaint to determine anti-competitive practices taken by travel portal MakeMyTrip and Oyo and clubbed the matter.
“There has been not a single case to our knowledge where a company being investigated for anti-competitive practices by the Director General of the CCI has been permitted to initiate an IPO by the SEBI. In view of the same, Oravel’s proposed IPO is premature and ought to be rejected/ deferred at this stage while a major investigation by the CCI remains pending,” said FHRAI in the letter to SEBI.
FHRAI further alleged that Oyo in its DRHP has failed to disclose the complete consequences of the CCI investigation which may lead to ‘behavioural changes’ to business practices engaged by the company and its subsidiaries.
Earlier this month, Zostel Hospitality Pvt. Ltd, which owns Zostel Hostels and ZO Rooms, also wrote to Sebi, urging it to reject the draft prospectus filed by Oyo and suspend the latter’s proposed initial public offering.
Citing the reason for its request, Zostel said Oyo’s “IPO is non-maintainable as Oravel’s capital structure is not final".