The Delhi High Court has dismissed a fresh plea filed by backpacker hostel chain Zostel, which had sought interim protection in its long-running legal battle with OYO (now PRISM). The order comes as a relief for OYO, which is gearing up for its proposed initial public offering (IPO), although the decade-old dispute is far from over.
Zostel had asked the court to direct OYO to set aside shares equivalent to its claimed 7% stake, or provide suitable security until the case is finally decided. According to Zostel, such protection was necessary to safeguard its interests before OYO enters the public markets. The High Court, however, declined to grant the interim relief.
The order does not settle the ownership dispute between the two companies. The main appeal, which will determine whether Zostel has any legal claim over OYO’s equity, is still pending before the court.
The dispute traces its origins to 2015, when OYO signed a term sheet to acquire Zostel. Zostel has maintained that it fulfilled its obligations under the proposed transaction and is therefore entitled to nearly 7% equity in OYO. OYO has consistently denied the claim, arguing that the term sheet was non-binding, the acquisition was never completed, and no obligation arose to issue shares.
The development assumes significance as OYO pushes ahead with its IPO plans. The company recently filed its Updated Draft Red Herring Prospectus (UDRHP) with SEBI, proposing to raise ₹6,500 crore through a 100% fresh issue.
According to the filing, ₹4,987 crore, accounting for nearly 77% of the issue proceeds, will be used to repay or prepay outstanding borrowings. The move is aimed at reducing debt, strengthening the company’s balance sheet and improving its financial position ahead of the proposed listing.
OYO has also reported improving operating performance. For the nine months ended December 31, 2025 (9MFY26), the company posted revenue of ₹6,940 crore, compared with ₹6,252 crore in FY25, reflecting 11% year-on-year growth. As of December 31, 2025, OYO operated 293,554 storefronts across hotels and vacation rentals in multiple international markets.
For existing unlisted shareholders, the High Court’s latest order removes an immediate procedural hurdle in OYO’s path to the stock market. However, the legal battle with Zostel remains one of the key issues to watch. Any final ruling in Zostel’s favour could have implications for OYO’s shareholding structure or financial obligations. The matter is scheduled to be heard next by the Delhi High Court on August 12, 2026.