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The Federation of Hotel and Restaurant Association of India (FHRAI) has written to market regulator SEBI urging it to reject the DRHP and suspend the proposed Initial Public Offer of hospitality major Oyo.
In the letter, the FHRAI has claimed that Oravel Stays, the parent company of Oyo, has misrepresented in the draft prospectus and is resorting to unfair, anti-competitive and fraudulent dealings and business practices, which include entering into anti-competitive agreements as well as abusing its dominant position. Oyo on October 1 filed its draft red herring prospectus (DHRP) with the SEBI for raising RS 8,430 crore through an IPO. The company has not responded to the charges leveled by the FHRAI but sources said that all the allegations leveled by the hotel body is well documented in the company's DHRP and some are in litigation. The FHRAI has said that it has already filed information in relation to the aforesaid abuse by Oyo with the Competition Commission of India (CCI), which, after a preliminary hearing found a prima facie case for initiating investigation for violations of the provisions of the Competition Act, 2002 and has accordingly directed the Director General under Section 26(1) of the Act, to investigate such violation vide order dated October 28, 2019. It is pertinent to point out there has been no stay of the order dated October 28, 2019 and the investigation of the Director General remains pending and is known to be at an advanced stage, the letter mentioned. "If the SEBI permits companies, against which there are prima facie findings of anti-competitive conduct and against whom investigations by the Director General of CCI are pending, to raise funds from the general public by way of an IPO, the same would set a very bad precedent and gravely prejudice the interest of the investors," the FHRAI said. It also said that there has been not a single case where a company being investigated for anti-competitive practices by the Director General of the CCI has been permitted to initiate an IPO by the SEBI. In view of the same, Oravel's proposed IPO is premature and ought to be rejected/ deferred at this stage while a major investigation by the CCI remains pending, the letter said. The FHRAI has further told the market regulator that Oravel has attempted to avoid a large number of contractual payment obligations towards the members of the FHRAI by claiming force majeure and frustration on account of Covid-19. A number of such 'patrons' have initiated arbitral proceedings and litigation against Oravel. It is thus clear that the cumulative effect of such litigation is material to the future financial health of Oravel, the letter said. In that light, any final determination on the right of Oravel and its subsidiaries to avoid payment obligations by claiming force majeure or frustration will have a material impact on every such litigation with similar questions of law. Thus, it is extremely crucial that Oravel disclose all litigation pending against it along with the total cost of such litigation borne by the company in order to enable potential investors to judge the viability of the Company and assess the true risk to any investment, the letter mentioned. The FHRAI has provided its views in the public review and comments invited by the SEBI on Oyo's DRHP. The development comes weeks after former rival of Oyo, Zostel, which has been embroiled in a more than five-year-long legal battle, sought the regulator's intervention against the IPO of the homegrown hospitality company. --IANS sn/vd ( 601 Words) 2021-10-25-19:58:01 (IANS)
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