Oyo rolls back controversial 6,000:1 bonus share plan after backlash

Instead of an equal bonus distribution, the proposal hinged on how shareholders responded within a tight election window and, crucially, on the progress of Oyo’s long-awaited listing.

Investors were to receive one Bonus Compulsorily Convertible Preference Share (CCPS) for every 6,000 equity shares held. Fewer than 6,000 shares? No bonus. What happened next depended on whether the shareholder took action during the election window.

Those who did nothing automatically fell into Class A, where each CCPS converted into one equity share — effectively one bonus share for every 6,000 held.

Those who actively opted in and submitted documents within the specified window could elect Class B, which carried a much higher potential reward: each CCPS would convert into 1,109 equity shares if Oyo appointed merchant bankers for its IPO before March 2026. If that milestone wasn’t met, however, the conversion would drop to 0.10 share per CCPS.

What was the company’s stated intent?

According to people familiar with the company’s plans, the intent behind the original scheme was to offer a reward to existing shareholders who had stayed invested ahead of Oyo’s planned IPO, rather than to alter the ownership structure. The company viewed it as a goodwill gesture designed to align long-term investors with its next growth phase.

How did investors respond?

After an outcry from shareholders over the tight timeline, paperwork, and eligibility limits, Oyo extended the election window to 6 pm on November 7, 2025, dropped the need to submit a Client Master List (CML), and opened a dedicated channel for investor queries.

Company sources said the updates were made after feedback that the three-day window was too short and that obtaining the CML from banks created unnecessary procedural hurdles.

The company also clarified that only equity shareholders were eligible, excluding preference shareholders — a category that includes founder Ritesh Agarwal and SoftBank Vision Fund, who hold significant stakes through such instruments. Oyo further indicated that overall dilution from the bonus issue would not exceed 5 percent on a fully diluted basis.

Why did the earlier structure draw scrutiny?

While these changes improved access, governance experts and minority investors continued to flag the two-tier structure as confusing and potentially exclusionary. Larger, better-resourced shareholders could easily comply and opt into the high-reward Class B, while smaller investors risked missing out due to procedural complexity.

Analysts said the design created an access-driven valuation gap rather than one based purely on conviction or long-term faith in the company.

The potential difference was striking: under Class A, a shareholder with three lakh equity shares would have received 50 CCPS, converting to 50 new shares — worth around Rs 1,300 at the company’s implied price. Under Class B, the same investor would have gained 55,450 shares, worth roughly Rs 14.4 lakh — provided the IPO milestone was achieved.

That disparity initially appeared significant when applied to Oyo’s largest shareholders. Founder Ritesh Agarwal, who directly owns 29.65 percent of Oyo, also controls RA Hospitality Holdings (Cayman) — his personal investment vehicle — which holds another 34.9 percent.

Early interpretations of the ballot suggested that if merchant bankers were appointed before March 2026, the promoter group could receive 1,109 equity shares for every bonus CCPS, substantially boosting their stake through conversion.

However, the company has maintained that only equity shareholders were eligible from the outset — excluding preference shareholders, including Agarwal and SoftBank’s substantial preference holdings — which meant the promoter group’s potential upside was more limited than some initial readings implied. Even so, given the scale of their equity ownership, even a modest bonus base could still translate into incremental value.

ALSO READ: Oyo founder Ritesh Agarwal set to invest Rs 550 crore, firm to be valued at Rs 32,000 crore

PRISM withdraws resolution, promises new structure

In a statement shared with Moneycontrol, PRISM said it is withdrawing the current resolution and will shortly introduce a new and simplified bonus structure that includes all shareholders — both equity and preference — and ensures equal participation without any opt-in process.

“We are not proceeding with the current resolution and will shortly bring a fresh, unified proposal for shareholder approval in accordance with the Companies Act, 2013. The revised structure will be announced in the coming days and will not require any application process,” a PRISM spokesperson said.

The company added that the new proposal, which will include smaller shareholders as well as CCPS holders, follows investor feedback and aims to enhance fairness and transparency.

“This decision reflects our continued commitment to governance-first growth, fairness, and long-term value creation for all classes of shareholders. The revised structure will reflect our belief that every shareholder deserves equal opportunity in PRISM’s next chapter of growth,” the spokesperson added.

The move effectively scraps the controversial two-class system, replacing it with a universal bonus issue that covers all investors automatically. The new proposal is expected to be tabled for shareholder approval in the coming days.

The bottom line

What began as a complicated, opt-in bonus plan linked to Oyo’s IPO has now been rolled back entirely. PRISM says the fresh proposal will be simpler, inclusive, and automatic, ensuring that all shareholders — large and small, equity and preference — participate equally in any potential reward.

Whether the new structure restores investor confidence remains to be seen, but for now, the company appears intent on turning a governance controversy into an opportunity for course correction.