Over two weeks after Zostel complained against Oyo's proposed initial public offering to the markets regulator, the latter has written to the SEBI claiming that the two parties mutually agreed to terminate the deal following due diligence issues in 2016.
In a 119 page letter, Oyo has mentioned the non binding term sheet between the two companies was "terminated by Zostel pursuant to email dated September 17, 2016 and agreed to by the company pursuant to email dated September 19, 2016. Both parties commenced negotiations on new terms, which were never finalized".
Earlier this month, Zostel Hospitality Pvt Ltd filed a complaint with SEBI claiming that Oyo had misstated details of their failed transaction in the draft documents submitted with the regulator.
Calling the filing of the DRHP "illegal", Zostel has been claiming that their shareholders were entitled to 7% stake in Oyo as per the term sheet signed.
Mentioning about the irregularities found during the time of due diligence, Oyo in its letter to the SEBI has mentioned that in October 2015, Zostel had only two months more of cash reserves left to fund its business and was running into losses.
It has also stated that Zostel had shared certain data with Oyo which were incomplete and inaccurate.
"Despite repeated requests, accurate data was not provided and company’s due diligence concerns were not resolved," reads the letter dated October 22.
Oyo has claimed that even the assets which were to be transferred to the company as part of the proposed transaction, were never transferred by Zostel.
It has mentioned names of 16 assets, including the customer data, domain names, redirection set up for web traffic and app package rights, among other things.
This is the latest in the ongoing dispute between the two companies which dates back to 2015. Over half a decade ago, Zo Rooms, the budget hotel accommodation chain owned by Zostel Hospitality, was shut down after the merger talks between the two, which could have resulted in Zo Rooms getting a seven percent stake in Oyo, failed.
The two companies have been fighting the case since then.
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