Oyo Scraps 6,000:1 Bonus Share Plan After Massive Criticism

Travel tech platform Oyo on Monday announced the withdrawal of its controversial 6,000:1 bonus issue plan, as per which, investors were to receive one bonus Compulsorily Convertible Preference Share (CCPS) for every 6,000 equity shares they hold in the company.

The company, in a statement, confirmed its roll back and said that it will shortly introduce a new and simplified bonus structure that includes all shareholders, ensuring equal participation and transparency, following feedback from shareholders.

"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. The revised structure will be announced in the coming days and will not require any application process," an Oyo spokesperson said.

As per the previously proposed bonus resolution, Oyo had announced a bonus issue linked to a potential IPO pathway for equity shareholders. The earlier structure was designed to allow them to participate in the potential upside through an opt-in process, but the new resolution will be applicable to all classes of shareholders without requiring them to apply.

This development follows the company's recent announcement extending the opt-in deadline to Nov. 9 and simplifying the participation process.

Under the now-scrapped bonus issue plan, shareholders were to get one preference share for every 6,000 equity shares held. They had the option of either opting in for a fixed conversion, where each such share becomes one equity share, or a milestone-linked option, with the milestone being the appointment of bankers for its potential IPO during the current financial year.

The plan had drawn criticism on social media, with financial expert Mohit Garg stating that the "bonus CCPS is a pure speculative bet which only insiders and promoters can control". He explained that the conditions of the bonus issue are as follows:

“Class A (Default):  1 CCPS → 1 share. (if you do nothing, ignore or miss the mail - you get 1 CCPS, which eventually converts to 1 equity share for every 6,000 shares).

Class B (Opt-in): If they are able to appoint "Merchant Bankers for IPO in this FY 25-26" → 1 CCPS → 1,109 shares. (So, one gets an additional 1109 bonus shares for every 6000 equity shares held now),” Garg said in his post.

He said that most retail shareholders end up with Class A shares, gaining little. On the other hand, promoters and large investors who opt for Class B could get a huge bonus if merchant bankers are appointed for a future IPO, Garg added.

“Now, only people who will know this & control this are promoters and senior folks in OYO. What an idea sirji.. let common investors ignore this message. Only promoters and large institutional holders apply for this Class B. They appoint Merchant bankers at their whims and corner a large pool of shares for free (sic),” Garg had further posted on X.