OYO Withdraws Bonus Issue: What Went Wrong and What’s Next

OYO’s parent entity, PRISM, recently faced significant investor feedback regarding its proposed bonus share structure announced in late October 2025. What was intended as a shareholder reward ultimately raised concerns about clarity, fairness, and accessibility, especially among smaller investors. This has now resulted in the complete withdrawal of the earlier proposal.

Overview of the Earlier Proposal

The bonus issue allowed eligible equity shareholders to receive Compulsorily Convertible Preference Shares (CCPS) at a ratio of 1 CCPS for every 6,000 equity shares held. Shareholders were required to choose between two conversion structures:

• Class A: 1 CCPS converting into 1 equity share (default option).

• Class B: 1 CCPS converting into up to 1,109 equity shares, contingent upon OYO appointing investment bankers for its IPO by March 2026. If this milestone was not met, the conversion value would significantly decrease.

The structure required shareholders to actively opt in within a short time frame. Additional documentation, such as the Client Master List (CML), further complicated the process for many.

Why Shareholders Raised Concerns

The proposal generated objections for several reasons:

• The response window was too short for many investors to complete the process.

• The potential outcomes between Class A and Class B were significantly uneven.

• The conversion under Class B depended on future company actions, creating uncertainty.

• Shareholders holding fewer than 6,000 shares were not eligible to receive any bonus allocation.

These issues led investors to question the fairness, accessibility, and overall intent of the structure.

Company Response and Withdrawal

In response to early concerns, PRISM extended the application deadline from November 1 to November 7 and removed the requirement to submit a CML. However, as investor feedback continued, the company decided to withdraw the bonus proposal entirely. PRISM has confirmed that it will introduce a revised structure that is simpler, more equitable, and more inclusive.

The updated plan will:

• Apply to all shareholders regardless of shareholding size.

• Require no applications or opt-in processes.

• Ensure bonus shares are credited automatically.

The revised proposal is expected to be released soon.

Broader Context

These developments come at a critical time as OYO prepares to file its Draft Red Herring Prospectus in November 2025, targeting a valuation of USD 7 to 8 billion. The bonus issue was initially designed to improve liquidity and reinforce shareholder confidence ahead of the IPO. Instead, the withdrawal reflects the company’s commitment to addressing governance concerns and ensuring shareholder trust before entering public markets.

PRISM's decision to redesign the structure demonstrates an effort to align with investor expectations and maintain confidence as OYO unlisted shares move toward its planned public listing.