India’s Oyo faces case in bankruptcy court

Hospitality unicorn Oyo has landed in a controversy over a case in the bankruptcy court. The National Company Law Tribunal has accepted a plea against a unit of Oyo Hotels and Homes Pvt Limited, a unit of Oravel Stays Pvt Limited.

The plea was filed by a creditor on March 30, claiming Oyo defaulted on a payment of 1.6 million rupees (US$21,521). The case has been listed for hearing on Thursday.

Meanwhile, Oyo founder and CEO Ritesh Agarwal on Wednesday took to Twitter to counter some news reports that the hotel aggregator had filed for bankruptcy. “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 1.6 million rupees from Oyo’s subsidiary leading to a petition at NCLT,” he tweeted.

In a follow-up tweet, he added: “Oyo has paid that under protest and amount already banked by the claimant. Oyo has also appealed with the NCLAT about the matter. Oyo is recovering from the pandemic steadily and our largest markets are operating profitably.”

An Oyo spokesperson expressed surprise over the tribunal admitting the petition, and said: “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.”

Pandemic toll

The hospitality industry was one of the worst hit after countries imposed travel restrictions and banned business travel. After the Narendra Modi government imposed a strict countrywide lockdown to curb the spread of Covid-19 from March 25 last year, Oyo and other hoteliers had to down shutters.

Oyo resumed operations two months later in June after the government eased lockdown norms with strict Covid-19 safety protocols. Its partner hotels were told to comply with the company’s “Sanitized Stay” initiative.

It involved the sanitation of properties along with the use of masks, gloves, sanitizers, practicing social distancing among workers and guests, requesting guests carry their own luggage and temperature checks of staff and guests.

By August the company began rolling back pay cuts it had announced in May and by December it was restored for all employees. It had also asked some of its staff in India to go on leave with limited benefits from May 4 for four months.

Second wave

However, the resurgence of Covid-19 across many parts of the country has again raised concerns about the recovery path of the hospitality sector as various states may impose travel restrictions. Hotels in markets such as Mumbai, Pune and Bangalore are expected to take the biggest hits as the states where they are located are witnessing a surge in new coronavirus cases.

Since September, the industry was seeing a growth in occupancies and in the December quarter it had surpassed 40%, the highest since March 2020. Until around February, hoteliers were expecting the recovery to continue this financial year. But the second wave has changed things.

India on Tuesday recorded more than 115,000 new Covid cases for the first time since the beginning of the pandemic last year. The government said the next four weeks are “very, very critical.”