Federation of Hotel and Restaurant Association of India (FHRAI) written to SEBI urging it to reject the DRHP and suspend the proposed IPO of Oyo, it 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 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.
“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.
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.
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.