OYO has clarified it has not filed for bankruptcy and termed the reports surrounding the same as “inaccurate” and “untrue.” OYO's founder and CEO Ritesh Agarwal said, “There is a PDF and text message circulating that claims OYO has filed for bankruptcy. This is absolutely untrue and inaccurate. A claimant is seeking Rs 16 lakh from OYO's subsidiary, leading to a petition at NCLT. OYO has paid that under protest and amount was already banked by the claimant. OYO has also appealed with the NCLT about the matter. OYO is recovering from the pandemic steadily and our largest markets are operating profitably.”
When contacted by THE WEEK, the OYO team confirmed that the news about the bankruptcy was false, and added that the whole confusion started after the NCLT admitted an order against its subsidiary, OHHPL, for an amount of Rs 16 lakh. OYO has challenged the NCLT order.
The OYO team said this is not the first time such an order has been admitted by the NCLT for a new age company like theirs. In February 2020 Flipkart had also faced such a petition, but it was set aside.
“We are surprised to hear that the honourable NCLT has admitted a petition against OHHPL, a subsidiary of OYO for Rs 16 lakh in a contractual dispute, which is not even with this subsidiary. We have filed an appeal. The matter is sub- judice and we would refrain from commenting further on the merits of the matter at this stage. We have strong faith and belief in our judicial system.” said an OYO spokesperson. The company also said Rs 16 lakh has already been paid to the claimant under protest by the entity with whom the dispute was raised (other than OHHPL).
Complaints and disputes are not new to OYO. As per a detailed analysis done by THE WEEK last year, the company had been dealing with them at a regular basis. Like every hospitality company, OYO had been in tremendous stress owing to COVID-19. But there were problems that had started much earlier such as chinks in its business model, complaints by property owners, unsatisfied customers and the side effects of scaling up too quickly. There were also complaints regarding OYO manipulating prices and artificially controlling demand with fake bookings.
A few hotel owners had said OYO has been indulging in discounting of hotel room rates without the permission of owners and had been charging below cost price and agreed rates. There had also been cases of illegal charging of hotel service fees that were not passed on to the hotels. Then there was manipulation of the micro-market rates that forced hoteliers to reduce room rates, so that they could have more traffic on their platform. Many problems that OYO had faced were due to their expansion in foreign markets. It had also been facing many labour issues in China. Many hotel owners had exited the platform owing to payment issues.
In an interview to THE WEEK in 2019, Ritesh Agarwal had talked at length about OYO’s ambitious plans to become the world’s biggest hotel chain by 2023. He had even undertaken a $2 billion share buyback. But things didn't go as planned. Scores of property owners had been unhappy with OYO’s alleged indifference to their concerns.