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Backpacker hostel chain Zostel has withdrawn its application filed before the Delhi High Court seeking directions to market regulator Securities and Exchange Board of India (Sebi) regarding its claim to a nearly 7 per cent stake in Oravel Stays (now PRISM), the parent company of Oyo.
While the court allowed Zostel to withdraw its application, it also declined to intervene at this stage in Sebi’s handling of Zostel’s complaint, observing that the regulator would examine the matter in accordance with the law.
The development comes a month after Zostel approached Sebi, alleging that Oyo made incomplete, misleading and selective disclosures in its updated draft red herring prospectus-I (UDRHP-I). Zostel had sought corrective disclosures before Oyo proceeded with its initial public offering (IPO). In June this year, Oyo filed the draft papers for its proposed IPO, which comprises a fresh issue of shares worth up to Rs 6,650 crore.
For context, Oravel and Zostel are locked in a legal dispute over a failed acquisition attempt. While Zostel alleges that the other party did not complete the deal, Oravel maintains that the term sheet it signed was non-binding and primarily exploratory in nature.
Since 2018, Zostel has approached the Gurugram district court, the Delhi High Court on multiple occasions, the Supreme Court and appellate benches of the Delhi High Court. None of those proceedings, however, has resulted in substantive relief.
In May 2025, the Delhi High Court set aside the arbitral award that formed the basis of Zostel’s claims, holding that the parties’ term sheet was largely non-binding and that specific performance could not be granted in the absence of definitive agreements on essential commercial terms.
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