In its filing to the Securities and Exchange Board of India (SEBI), PRISM has disclosed potential risks stemming from ongoing legal proceedings with Zostel Hospitality and a penalty imposed by the Competition Commission of India (CCI). The company warned that an adverse outcome in these matters could significantly impact its business operations and financial condition.
PRISM entered into a non-binding term sheet with Zostel Hospitality Private Limited for a potential acquisition that did not materialize. Zostel claims it fulfilled all obligations, while PRISM argues the term sheet was exploratory and non-binding. An arbitrator ruled in favor of Zostel, but PRISM successfully challenged this in the Delhi High Court, which set aside the award citing conflict with public policy. Zostel has since appealed the decision.
PRISM's filing states that if Zostel prevails in court, the company may have to transfer up to 7% of its shareholding or pay an equivalent monetary value. PRISM also noted the possibility of future adverse orders affecting its financial condition and management focus.
“If Zostel succeeds at a stage with a non-appealable order, our company may be required to issue or transfer up to seven per cent of our shareholding (or pay an equivalent monetary value) as per the direction of the court, to Zostel and certain other parties.”
PRISM filing
In a separate matter, the CCI has penalized PRISM Rs 168.8 crore for anti-competitive practices in an agreement with MakeMyTrip India and Ibibo Group. PRISM has appealed this decision to the National Company Law Appellate Tribunal (NCLAT). If the appeal is dismissed, PRISM may need to deposit the remaining penalty amount, subject to any modifications by the NCLAT.
Despite these challenges, PRISM emphasized that the CCI penalty does not require restructuring of its core commission model or affect its relationships with patrons. The company plans to challenge any unfavorable NCLAT decision in the Supreme Court.
Background
The ongoing legal battles underscore the complexities PRISM faces as it navigates regulatory and competitive landscapes. The outcome of these cases could set precedents impacting future mergers and acquisitions in India.
Looking ahead, stakeholders will be closely monitoring the outcomes of PRISM's legal challenges, as these will have significant implications for its IPO and operational strategies.
