Cites FIRs against Oyo, reports of massive losses in statement

The Federation of Hotel & Restaurant Associations of India (FHRAI) has once again strongly urged the Securities and Exchange Board of India (SEBI) to call off Oyo’s Initial Public Offering (IPO) citing the massive losses suffered by the hotel rooms aggregator in recent years. As per reports, Oyo incurred losses of Rs 3,943.84 cores in FY20-21 translating to a loss of over Rs 76,077 every minute. Since its inception in 2013, Oyo has been running in losses and its total turnover fell a drastic 69% from Rs 13,413 crore in 2020 to Rs 4,157 crore in 2021. FHRAI has cautioned that Oyo’s IPO will only wipe out public wealth while enriching its founders and key management. 

FHRAI had previously objected to gross misstatements and inadequate disclosures contained in the Draft Red Herring Prospectus (DRHP) filed by Oyo. 

“In addition to engaging in anti-competitive business practices, Oyo is a company that has consistently registered losses since its inception. It may have raised a lot of money to become touted as one of India’s most promising startups but it hasn’t done enough to manage the business on the ground as efficiently. Oyo has one of the highest ESOP pools of USD 1.1 billion which too is absurd. In addition to its financial complications and losses, the company is being investigated for anti-competitive practices by CCI. Oyo' s CIRP proceedings is being heard by Supreme Court. Oyo has failed in running and operating hotels and used COVID as a pretext to walk out of 100s of hotels with whom they had MSA Agreements and they have not cleared dues of these small hapless hoteliers. As of date, it is reported that Oyo has stopped operating single hotels and has been reduced to just another online travel agent. The hospitality industry is wary of Oyo and as its voice, FHRAI wants to caution the public and urges the SEBI to call off its IPO,” said Gurbaxish Singh Kohli, Vice President, FHRAI. 

Previously, FHRAI has also filed a complaint with the SEBI stating Oyo’s tax evasion. The Directorate General of GST Investigation (DGGI) had filed a case of GST/service tax evasion against Oyo and its subsidiaries. 

Pradeep Shetty, Jt. Hon. Sec., FHRAI, said, “Oyo has been deliberately suppressing sales figures. It has been under-reporting revenues generated from hotels and has also been evading taxes. There are several Oyo partner hotels across the country and globe that have also reported the same. The company has been soliciting a large number of bookings at competitive prices of less than Rs 1,000 per booking which as per the rate slab does not attract any GST. However, Oyo generates a supplementary invoice under the tab ‘convenience fee’ in addition to the booking invoice and conveniently evades tax.” 

FHRAI has also pointed out that there are a number of FIRs against Oyo registered under Sections 420, 406 and 409 of the IPC, some of which are grievous economic offences entailing a maximum punishment extending up to imprisonment for life. 

“In view of the aforesaid, we request the SEBI to suspend the IPO process to protect the interest of all stakeholders as well as the general public,” said Kohli.