The battle between Zo Rooms and Oyo has intensified with a fresh plea in the Delhi high court against the restructuring move by the SoftBank-backed accommodation major.
Zo Rooms on January 21 filed a petition in the Delhi HC against Oyo’s decision to restructure its businesses and house them in new entities without informing the arbitrator or Zo. It added the demerger will adversely affect the claim sought by Zo in the ongoing arbitration, contesting a 7% stake in Oyo parent — Oravel Stays.
Both Zo and Oravel Stays had entered into talks for a merger in 2015. These fell through, which eventually led to the ongoing arbitration. A M Ahmadi, former chief justice of India, is the sole arbitrator, following a Supreme Court directive in October 2018.
Zo has now made two new entities — Oyo Hotels and Homes, and Oravel Stays Singapore, a party to the arbitration. The Delhi high court, after the new petition by Zo, in its order dated January 24, has asked Oyo to file a response on the matter to the arbitrator within two weeks. According to experts, this means these entities will also be bound by an arbitral award, based on the final decision.
For context, the original dispute was between Zo Rooms and Oravel Stays. But the recent transfer of parts of businesses by Oravel Stays to Oyo Hotels & Homes and Oravel Stays Singapore might result in Zo losing out on the value of businesses moving to other entities. 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 Delhi high court, in its order, has mentioned that the petition stands disposed of and the arbitrator should fix a date of hearing with consent of both the parties.
In an e-mailed response, Oyo said it cannot comment specifically on the matter due to the prohibition imposed by judicial forums. “Important to note that this restructuring doesn’t have any adverse impact on the company’s value. The entire demerger process occurred and necessary filings were completed across different stages since March 2019 and even communicated publicly through newspaper advertisements in June 2019 and September 2019,” an Oyo spokesperson added. Zo’s legal counsel declined to comment on the matter.
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