The co-founders of India’s No. 1 airline are engaged in a bitter feud. Theirquarrel couldn’t have come at a worse time for minority shareholders ofInterGlobe Aviation Ltd., the company that owns IndiGo.

Investors were just starting to enjoy the fruits of a frenetic expansion that saw the no-frills carrier, Asia’s largest, double its capacity in the three years through March. Full-cost rivalJet Airways IndiaLtd. tried to keep up, until it was forced to groundits last planein April under a truckload of debt. Meanwhile, InterGlobe has put together a cash war chest — net of debt — of nearly $2 billion.

This is the time for IndiGo to be rewarding shareholders by consolidating its leadership position and filling the gap left by Jet, especially on overseas routes. Instead, the founders are busy picking fights.

Rakesh Gangwal, a former CEO of U.S. Airways Group Inc., has dashed off a letterto the Indian stock-market regulator alleging corporate-governance lapses. He says partner Rahul Bhatia, who owns 1 percentage pointmore than U.S.-based Gangwal’s 37% stake, is dragging IndiGo into transactions with his other businesses, which are mostly housed under InterGlobe Enterprises Ltd.(IGE Group), without adequate auditing.The airline pays rentto IGE’sreal-estate unit; thecrew stays athotels operated by Bhatia’s joint venture with Accor SA;pilots are trained at IGE’sflight simulator, a collaboration with Canada’s CAE Inc.; aBhatia firm has also actedas a sales agent for IndiGo.

What amounted to$22 millionofrelated-party transactions, for a carrier that took in $4 billion in annual revenue, doesn’t exactlysmack ofa governance scandal. Not at an airline that thrives on keeping its costs under control.Bhatia, for his part, wants to know why Gangwal is questioning the arrangementsnow when he “did not raise for 13 years a whisper.” The India-based partner sayshe took most of the economic risk when setting up the airline.Besides, Gangwal isn’t denying entering intoashareholders’ agreement that gives Bhatiacontrol,including thepower to nominate half of the six-member board and most of the top managers.

Gangwal’s letter mentions whistleblowers.Unlessthose charges are serious and material, the battle looks more about monetizing a business that he never wanted any part ofuntil a persistent Bhatia talked him into it.

Today, the co-founders can be legitimately proud ofIndiGo, arare success story in global aviation,achieved in a brutally price-competitive and fast-growing market.The problem seems to be aboutdividing up that success fairly.

It probably rankles billionaire Gangwal, the strategy whiz, that his37% stake is perhaps worth less than the market value of roughly $3 billion, while his money-man (former) friend’s38% stake isworth muchmore.(1) After all, any airline or a buyout firm willing to write that big a check would want a measure of influenceover the airline’s future: That’s something only Bhatia can give.If that’s the real reason Gangwal is seeking to enlistthe regulator’s help “to make necessary changes to the unusual controlling rights available to the IGE Group,”then it’s a failure of mediation.

From the shareholders’ perspective, it’s a dangerous lapse. Indians’ trust in businessand business tycoons, finance and financiers, accounts and auditorshas probably never been lower. Any suggestion of impropriety now can spiral out of control. No wonder theinfighting dragged InterGlobe shares down nearly 11%on Wednesday, as investors braced themselves for a protracted and unpleasantlegal and public-relations skirmish – muchlike the one that flared up at theTata Group in 2016, afterit fired then-ChairmanCyrus Mistry,who also happened to be a large shareholder.

IndiGo becameNo. 1 by making flights take off and land on time more often than most other large global airlines. To investors’ horror,themessiness the carrier so studiouslyavoided in its operations –by relying on a single type of aircraft (the narrow-bodied Airbus), deploying itsfleet efficiently and growing it strategically – has finally come back to haunt it. Not at the tarmac, but inthe boardroom.

(1) The total market capitalization is about $8 billion.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)

First Published: Jul 11, 2019 11:57 IST