Zostel and OYO have been engaged in legal warfare for the last 3 years, after the Ritesh Agarwal led company acquired its competitor in 2015. Today, ZO Rooms’ shareholders have finally achieved what they set out to do when they challenged OYO, after an independent arbitral ruled in favor of Zotel, saying that its shareholders are in fact entitled to the promised 7% in the company.
According to the ZO Rooms, the two entities initiated talks of a possible acquisition in 2015, when OYO was just a shadow of the giant hospitality platform that it has become today, promising the company’s shareholders a 7% stake in the combined entity in exchange for their exit. However, OYO failed to do so, and the shareholding was never credited to Zostel. Meanwhile, ZO Rooms completed its part of the agreement, and transferred the entire business to OYO in 2016.
Upon this, ZO led an arbitration against OYO, which then saw Justice AM Ahmadi being appointed as the sole Arbitrator after a Supreme Court Directive in October 2018.
Today, Hon’ble tribunal has held the decision that the contract between Zostel and OYO was in fact binding, and that the multi billion dollar startup will have to issue 7% shareholding to ZO Rooms’ shareholders.
Mr. Paavan Nanda Ex Co-founder, Zostel, said “We welcome the judgement by the Hon’ble tribunal. Beyond the monetary compensation, it was a fight for our rights and reputation. We are extremely relieved with the judgement that the arbitral tribunal has pronounced after diligently evaluating the merits and evidences produced by us over the last 3 years.”
However, OYO retains its stand and claims that Zostel is not liable to any shareholding. The company said in a blog post, “The arbitration hasn’t given any direction for issuance of shares as the definitive agreement was neither agreed nor consummated and therefore, closing conditions were far from being achieved.”
“The final award purports to provide Zostel a right to initiate ‘appropriate proceedings’ and for seeking execution of the definitive agreement while no specific remedy for the same was granted except against their prayer for a cost, which Oyo will vehemently oppose in all avenues available under the law of the land,” OYO added.
Nonetheless, according to a recent regulatory filing with the Ministry of Corporate Affairs. OYO has raised $7.31 Million at a share price of $58,490 as a part of its Series F1 round, valuing the company at a whopping $9 billion. Procurement of 7% of the company’s shares by ZO Rooms’ shareholders will make this outcome the biggest exit in the Indian startup ecosystem, surpassing the Snapdeal-Freecharge Deal of $400 Million back in 2015.