Zostel has approached the Securities and Exchange Board of India (SEBI), urging the market regulator to examine disclosures made by Oravel Stays, the parent company of Oyo(PRISM), in its updated draft red herring prospectus (UDRHP) filed for its proposed initial public offering (IPO).

In a representation submitted on July 7, the company alleged that Oyo's IPO document presents an incomplete and selective account of the long-running legal dispute between the two firms.

Zostel has asked SEBI to examine whether the disclosures meet the standards of completeness, fairness and materiality prescribed under the SEBI Act and the ICDR Regulations before allowing the IPO process to move forward.

The company argued that the dispute is not an ordinary commercial case as it concerns Zostel's claim to around 7% equity in Oyo, or its corresponding economic value, arising from the failed acquisition deal between the two companies. It contended that the outcome of the litigation could have implications for Oyo's capital structure, valuation and investors' assessment of litigation risk, and therefore deserves more comprehensive disclosure in the IPO papers.

The dispute dates back to 2015, when Oyo signed a non-binding term sheet to acquire Zostel's business. In 2021, an arbitral tribunal ruled in Zostel's favour. However, the Delhi High Court later set aside the award, holding that the term sheet was non-binding and did not create enforceable rights. In July 2025, the Supreme Court refused to entertain Zostel's appeal against that order. Zostel, however, maintains that appellate proceedings arising from the dispute are still pending before the Delhi High Court and should be adequately reflected in Oyo's IPO disclosures.

In its representation, Zostel further alleged that the UDRHP understates the evidentiary record, selectively characterises the underlying transaction and does not sufficiently explain the commercial significance of the pending proceedings. It has requested SEBI to direct Oyo to make corrective or supplementary disclosures, ask the book-running lead managers to undertake further due diligence, and consider whether the IPO should progress only after the disclosure concerns have been addressed.

Entrackr has reached out to Oyo for more information.

Last month, the hospitality major filed an updated draft red herring prospectus with SEBI to raise Rs 6,650 crore through a fresh issue of shares, with no offer-for-sale component.