The war between IndiGo’s two promoters Rahul Bhatia and Rakesh Gangwal is now public with the latter approaching markets regulator SEBI against “unusual rights” available to the former due to paucity of independent directors on the Board. This, according to him, led to governance matters being overlooked worse than in a ‘paan ki dukaan’.
Mr. Bhatia, through his Interglobe Enterprises (IGE), has 38% shareholding in InterGlobe Aviation Limited, IndiGo’s parent company, while Mr. Gangwal holds 37% share in the company. The airline enjoys nearly 50% market share among all airlines in the country.
“The unusual rights available to the IGE Group in conjunction with the lack of diversity and paucity of independent directors in the Board may very well be the root of why governance matters have taken such a back seat at IndiGo. I request SEBI to look into and, if thought fit, ask the company to make necessary changes to the unusual controlling rights available to the IGE Group,” Mr. Gangwal urged in his letter dated July 8 to SEBI Chairman Ajay Tyagi.
The ‘unusual rights’ detailed included the right to appoint three out of six directors of IndiGo, the managing director, the CEO, the president and chairman of the board, and a voting arrangement that requires Mr. Gangwal and his affiliates to vote alongside of the IGE Group on the appointment of directors.
Mr. Gangwal underlined that while the shareholding agreement was due to expire in November, as per the articles of association, these terms would continue to survive. Therefore, he was approaching the SEBI to intervene.
He also raised the absence of a woman independent director on the Board as a violation of the regulations.
At the heart of the conflict is also the businesses carried out between IndiGo’s parent company and Mr. Bhatia’s IGE, such as in provision of hotel accommodation for crew at Novotel hotels, in which IGE has a share.
“I hadn't contemplated over that over the years, Mr. Bhatia would start building an ecosystem of other companies that would enter into dozens of related party transactions with IndiGo. We are not against RPTs as long as proper checks and balances exist and such RPTs are in the best interest of the company,” Mr. Gangwal wrote.
The letter said that while these terms were agreed to by both parties at the time of the company being listed, however, times, circumstances and behaviour of promoters had changed since 2015.
Mr. Gangwal also rubbished remarks made by the airline’s CEO Ronojoy Dutta in a television interview that these were administrative issues, and said these were in fact “troubling credibility issues”.