Zostel Withdraws Plea Against OYO, Next Hearing Scheduled

Budget hostel chain Zostel has withdrawn an urgent application it had filed with the Delhi High Court. The application sought protection for a 7% stake in PRISM, the parent company of hospitality chain OYO, which is preparing for an Initial Public Offering (IPO). Zostel requested that its claimed stake be held in escrow or secured until the ongoing dispute between the two companies is resolved.

The withdrawal comes after OYO filed its updated Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) last month, aiming to raise approximately ₹6,650 crore (about $800 million) through a fresh issue of shares. The court dismissed the application as "not pursued," referencing a March 2022 order.

The dispute, spanning over a decade, centers on a 2015 agreement where OYO was to acquire Zostel's budget hotel business, Zo Rooms, in exchange for equity. Zostel asserts entitlement to a 7% stake in OYO, while OYO maintains the agreement was non-binding and its conditions were unmet. Although an arbitral tribunal initially ruled in favor of Zostel in 2021, finding OYO in breach of contract, the Delhi High Court later set aside this award in May 2025, ruling the underlying term sheet non-binding.

Zostel has appealed this judgment, with a hearing scheduled for August 12. The company has also requested increased scrutiny from SEBI regarding OYO's IPO disclosures, urging that investors be informed of the potential equity transfer or equivalent payment. OYO's legal counsel has described this as Zostel's ninth unsuccessful judicial attempt.

The ongoing legal battle is intertwined with OYO's IPO plans. OYO strongly contests Zostel's claims, viewing them as baseless, particularly given the court's prior decisions regarding the non-binding nature of the original agreement.