Zostel Withdraws Delhi HC Plea Seeking SEBI Review Of OYO’s IPO Disclosures

Budget hostel operator Zostel has withdrawn its plea to the Delhi High Court requesting SEBI to review OYO’s IPO disclosures, particularly those concerning Zostel’s alleged 7% stake in OYO’s parent company. Zostel announced the withdrawal in a statement to Inc42, asserting that the Delhi High Court had observed that its concerns would be addressed by SEBI regardless, as the IPO draft papers have not yet received regulatory approval.

The company emphasized that its rights and remedies remained unaffected, and it still holds confidence in its case pending before the High Court. The Delhi High Court declined to direct SEBI to take any action, stating that the regulator would conduct its review in line with the law. PRISM, OYO’s hospitality subsidiary, maintained its confidence in its legal position, stating that Zostel’s recent filings were frivolous and not maintainable, despite prior counsel informing the court of unpaid legal fees.

The dispute between OYO and Zostel traces back to 2015 when OYO purportedly signed a non-binding term sheet to acquire a portion of Zostel’s business, though no definitive agreement was reached. In 2021, an arbitral tribunal deemed the term sheet binding through party conduct, though it did not order any specific outcomes. OYO appealed the award, leading to its dismissal by the Delhi High Court in May 2025, citing it as contrary to public policy and unenforceable for an incomplete transaction.

Zostel subsequently withdrew its appeal to the Supreme Court and refiled an application before the Delhi High Court under the Arbitration and Conciliation Act. The matter remains unresolved. The dispute flared again following OYO’s confidential IPO filing in December 2025, prompting Zostel to seek escrow of 7% of OYO’s equity shares and a SEBI review of the IPO disclosures.

PRISM recently submitted its updated draft registration statement (DRHP) in June for an ₹6,650 crore public offering aimed at repaying debt and funding growth initiatives.