Prism, the parent company of OYO, highlighted its legal dispute with Zostel as a significant risk in its draft red herring prospectus (DRHP) for the upcoming initial public offering (IPO). The company emphasized that any negative outcome from the ongoing legal proceedings could have a substantial adverse impact on its business, reputation, and financial standing. The disagreement originated from a non-binding agreement for Prism to potentially acquire Zostel’s business, which ultimately did not materialize due to conflicting claims between the two parties.
The DRHP revealed that if the legal dispute favors Zostel, Prism might have to transfer or issue up to 7% of its shares to Zostel or make a monetary payment as directed by the court. Prism clarified that the initial agreement with Zostel was exploratory and not legally binding, with no definitive contracts executed and unresolved commercial terms. Despite an arbitral tribunal ruling in favor of Zostel, the Delhi High Court overturned the decision, citing conflicts with India’s public policy. The case is currently under appeal before a Division Bench of the Delhi High Court, awaiting a final resolution.
In the event that Zostel prevails in the legal proceedings without further appeal options, Prism could be instructed to transfer shares or provide a monetary equivalent, in line with the court’s directives. The outcome of this legal battle holds significant implications for Prism’s future operations and financial stability.
