OYO parent withdraws complex bonus plan after investor pushback

PRISM, the parent company of OYO (formerly Oravel Stays), has withdrawn a controversial bonus-share proposal after investors raised concerns about its unusual structure and eligibility rules.

The company said it will introduce a simplified bonus scheme covering all shareholders, replacing the earlier plan that tied rewards to both a time-bound election process and progress on OYO’s long-anticipated initial public offering.

The earlier proposal, introduced as Resolution No. 2 in a postal ballot, stood out for its complexity. Instead of a standard, broad-based bonus issue, the plan required shareholders to make an election within a narrow window and tied the potential payout to milestones in OYO’s IPO journey.

Under the now-withdrawn plan, investors were to receive one bonus Compulsorily Convertible Preference Share (CCPS) for every 6,000 equity shares held. Those who took no action were automatically placed in Class A, where each CCPS would convert into one equity share—effectively one bonus share for every 6,000 shares held.

Those who actively opted in and submitted documents within the election window could join Class B, which carried a far higher potential return: each CCPS would convert into 1,109 equity shares if OYO appointed merchant bankers for its IPO before March 2026. If that milestone wasn’t met, however, the conversion rate would drop to 0.1 share per CCPS.

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OYO extends bonus share election deadline, clarifies IPO-linked reward terms

Shareholders questioned the short three-day election window, paperwork requirements, and eligibility limits. In response, OYO extended the deadline to 6 pm on November 7, 2025, dropped the requirement to submit Client Master Lists (CMLs), and opened a dedicated help channel for investor queries.

The company also clarified that only equity shareholders were eligible, excluding preference shareholders, including founder Ritesh Agarwal and the SoftBank Vision Fund, both of whom hold substantial stakes through preference instruments. PRISM said total dilution from the bonus issue would not exceed 5% on a fully diluted basis.

Even after those adjustments, governance experts and minority investors continued to flag the plan as confusing and potentially inequitable. Larger or better-resourced investors could easily meet procedural requirements and qualify for the high-reward Class B, while smaller investors risked missing out.

The gap between outcomes was significant. For instance, an investor holding 300,000 equity shares would have received 50 CCPS, translating to 50 new shares under Class A, worth roughly Rs 1,300 at OYO’s implied price. Under Class B, the same investor could have received 55,450 shares, worth about Rs 14.4 lakh, provided the IPO milestone was achieved.

Early interpretations of the ballot also led to confusion about potential benefits to OYO’s promoter group.

Ritesh Agarwal directly owns 29.65% of OYO and controls RA Hospitality Holdings (Cayman), which holds another 34.9%. Some investors initially believed the promoter group could gain disproportionately if the IPO-linked trigger was met. The company later clarified that, because preference shareholders were ineligible, those holdings were excluded from the bonus plan.

PRISM said the new structure, to be announced shortly, will eliminate such distinctions and ensure equal participation for all shareholders, both equity and CCPS.

“We are not proceeding with the current resolution and will shortly bring a fresh, unified proposal for shareholder approval in accordance with the Companies Act, 2013,” a PRISM spokesperson said. “The revised structure will reflect our belief that every shareholder deserves equal opportunity in PRISM’s next chapter of growth.”