TravTalk India Online Magazine
The Federation of Hotel & Restaurant Associations of India (FHRAI) has made a submission to Securities & Exchange Board of India (SEBI) to suspend Oyo IPO citing gross irregularities and fraudulent dealings. These include being engaged in anti-competitive business practices and inadequate disclosures of critical court cases.
Objecting to gross misstatements and inadequate disclosures contained in the Draft Red Herring Prospectus (DRHP) issued by Oravel Stays (Oyo), FHRAI has made an official submission to SEBI to suspend its IPO process. The eight-page submission draws attention to irregularities like being engaged in anti-competitive business practices; inadequate disclosures of critical court cases; no disclosure on scenarios that may result in the holding company losing control of management of subsidiaries, or entirely making the current business strategy unviable, should the rulings go against them; and, valuations that appear impossibly stretched when corroborated with other numbers disclosed in the DRHP.
Gurbaxish Singh Kohli, Vice President, FHRAI, says, “The investigation by the Competition Commission of India (CCI) is a serious one. To our understanding, there has not been a single instance where a company being investigated for anti-competitive practices by the Director General of the CCI has been permitted to initiate an IPO. It is important to note that Oravel in the Risk Factors section in the DRHP, has failed to disclose the consequences of an unfavourable verdict. They have disclosed the consequences of a possible penalty imposed by the CCI, but haven’t disclosed that CCI also has the power to direct behavioural changes to be undertaken by Oravel, which may completely upset the anti-competitive business practices engaged by them. Without this advantage, their revenues will be seriously impacted.”
The submission to SEBI further states that based on the information filed by FHRAI with the CCI, the latter found a prima facie case for initiating investigation for violations of the provisions of the Competition Act, 2002. Accordingly, it directed the Director General to investigate the violation vide order dated 28.10.2019. The investigation is currently at an advanced stage. The DRHP filed by Oravel fails to disclose that there has been no stay on the prima facie findings of the CCI or the investigation. Moreover, instead of making a fair disclosure, Oravel, in its DRHP, has tried to confound investors by conflating irrelevant issues relating to the interim reliefs sought by RubTub Solutions (Treebo) and Casa2Stays (FabHotels).
