The Federation of Hotel and Restaurant Associations of India (FHRAI) has once again urged the Sebi to call off Oyo’s Initial Public Offering (IPO) citing the massive losses suffered by the SoftBank-backed company in recent years.
Oyo incurred losses of Rs 3,943.84 crore in 2020-21 (FY21), translating to a loss of over Rs 76,077 every minute, the FHRAI said. Since its inception in 2013, Oyo has been running in losses and its total turnover has fallen a drastic 69 percent from Rs 13,413 crore in 2020 to Rs 4,157 crore in 2021, the association added. FHRAI said that the SoftBank-backed company’s IPO will only wipe out public wealth while enriching its founders and key management.
To be sure, FHRAI had previously objected to gross misstatements and inadequate disclosures in Oyo’s Draft Red Herring Prospectus (DRHP).
“In addition to engaging in anti-competitive business practices, Oyo is a company that has consistently registered losses since its inception. It may have raised a lot of money to become touted as one of India’s most promising start-ups but it hasn’t done enough to manage the business on the ground as efficiently,” said Gurbaxish Singh Kohli, Vice President, FHRAI.
Oyo has one of the highest ESOP (employee stock option programme) pools of $1.1 billion which too is absurd. In addition to its financial complications and losses, the company is being investigated for anti-competitive practices by CCI,” Kohli added.
Kohli also said that Oyo's corporate insolvency resolution proceedings are being heard by the Supreme Court and Oyo has failed in running and operating hotels and has used COVID as a pretext to walk out of hundreds of hotels with which the company had MSA agreements (master service agreements). Kohli also alleged that Oyo has not cleared the dues of many small hoteliers.
“As of date, it is reported that Oyo has stopped operating single hotels and has been reduced to just another online travel agent. The hospitality industry is wary of Oyo and as its voice, FHRAI wants to caution the public and urges the Sebi to call off its IPO,” Kohli said.
Previously, FHRAI has also filed a complaint with the Sebi stating Oyo’s tax evasion and the Directorate General of GST Investigation (DGGI) had filed a case of GST or service tax evasion against Oyo and its subsidiaries, FHRAI said.
FHRAI has further added that there are a number of FIRs (first information reports) against Oyo registered under sections 420, 406, and 409 of the IPC (Indian penal code) some of which are grievous economic offences entailing a maximum punishment extending up to imprisonment for life.
“Oyo has been deliberately suppressing sales figures. It has been under-reporting revenues generated from hotels and has also been evading taxes. There are several Oyo partner hotels across the country and globe that have also reported the same,” said Pradeep Shetty, Joint Secretary, FHRAI.
“The company has been soliciting a large number of bookings at competitive prices of less than Rs 1,000/- per booking which as per the rate slab does not attract any GST. However, Oyo generates a supplementary invoice under the tab ‘convenience fee’ in addition to the booking invoice and conveniently evades tax,” Shetty added.
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The SoftBank-backed company has delayed its listing plans amid volatile market conditions. Oyo had filed its draft papers with the markets regulator in October last year.
Moneycontrol had earlier reported that the SoftBank-backed company has filed a request for exemption in late February and the request was under process according to Sebi’s website. While there were no details mentioned, people familiar with the development had told Moneycontrol that Oyo was seeking Sebi’s permission to file an updated draft prospectus instead of a new one, as there are material changes since it was initially filed for an IPO late last year.
Oyo had slashed the size of its issue, from the initial over Rs 8,430 crore it sought to file as it was looking to do away with the Rs 1,430 crore offer for sale (OFS) component altogether.Earlier, Bloomberg reported that Oyo is considering slashing its fundraising target by half or even shelving the debut. Oravel Stays could clip its Indian IPO from the nearly $1 billion initially sought to half of that amount.