OYO Writes To NCLT To Expedite MCA Inquiry On FHRAI Executive Committee

IPO-bound traveltech major OYO has written a scathing letter to the National Company Law Tribunal (NCLT) and requested to expedite the Ministry of Corporate Affairs (MCA) investigation on the running of the Federation of Hotel & Restaurant Associations of India (FHRAI) and its executive committee.

The traveltech major has alleged that certain members of the FHRAI executive committee have a ‘vested interest’ against the new-age tech players in the hotel and restaurant industry.

In the letter written to the NCLT, OYO said that while the government is working to improve the ease of doing business in India, the startups in the country including OYO are subject to ‘concerted and intimidatory tactics’ launched by the present committee of FHRAI.

The startup also alleged that the FHRAI has used the tactics across multiple forums ‘with the sole malicious intent to harm the hotel industry of the country.’

OYO also highlighted the recent allegations of unfair elections and mismanagement made by the Hotel & Restaurant Association of Northern India (HRANI) and the Hotels and Restaurants Association of Western India (HRAWI), two regional chapters of FHRAI. 

It is interesting to note that the tribunal’s principal bench also noted that the objective of the FHRAI has been defeated by ‘petty squabbles’ on multiple occasions.

“Personal interest has come to loom over the functioning of FHRAI. Certain members of various regions of FHRAI are breeding litigation for personal reasons and we strongly disapprove of it,” read OYO’s letter to the NCLT. 

Apart from the strongly-worded letter against the association, OYO’s lawyers pointed out that the governing body members of the hotel and restaurant association are ‘running a deleterious and malicious agenda’ aimed towards ruining the interest of the hotel industry during the proceedings before the NCLT.

OYO’s lawyers also alleged that the FHRAI was ‘creating hurdles and bottlenecks for new players in the market’. According to the traveltech unicorn, new players including OYO itself are ‘posing a stiff challenge to the self-serving agenda of certain members of the FHRAI with a vested interest.’

The move comes after FHRAI approached the Securities and Exchange Board of India (SEBI) on no less than three occasions in one year; between October 2021 and November 2022, urging the market regulator to stop OYO’s IPO. 

Most recently, the association approached SEBI after the Competition Commission of India (CCI) imposed a penalty of INR 168.88 Cr on OYO over unfair business practices. However, the NCLT has since stayed the said penalty.

OYO’s letter comes after the startup saw its IPO delayed multiple times, with a further three months’ delay added earlier this week. Recently SEBI asked the traveltech startup to share updated draft documents because it did not provide updated financial disclosures for the September quarter of FY23.

Speaking of the September quarter, OYO recorded losses of INR 333 Cr during Q2 FY23, down nearly 20% from INR 414 Cr in Q1 FY23. 

The startup’s total losses for the first six months of FY23 stood at INR 747.1 Cr in the first half of FY23, down 22.2% compared to INR 959.8 Cr during the year-ago period. At the same time, total income during the H1 FY23 rose to INR 2,956.7 Cr, up from INR 2,436.8 Cr during the year-ago period.

OYO also laid off 600 employees in December 2022, citing restructuring of the product and engineering teams.