Promoters of IndiGo smoke peace pipe; board agrees to raise number of members

NEW DELHI: IndiGo chairman M Damodaran has brokered a truce between the airline’s warring promoters — Rahul Bhatia with his family-controlled Inter-Globe Enterprises (IGE) and Rakesh Gangwal.

On the issue of IndiGo entering into related party transactions (RPT) with IGE Group companies, a policy is being worked out that transaction of over a certain value, likely to be Rs 2 crore and above, will be examined by outside consultants, say sources.



From 6 to 10: IndiGo board agrees to raise no. of members

"On earlier issues of RPTs raised by Gangwal, IndiGo has sent its replies to Securities & Exchange Board of India (Sebi). According to the policy being worked out, if the outside consultant has an issue with IndiGo entering into certain RPT with IGE Group companies, independent directors will decide on the matter," said sources.

The board meeting last week decided to increase the number of board members from six to 10. The news of this likely truce sent IndiGo shares rising by 4.7% on BSE on Wednesday when the broader market was down 0.36%. TOI didn't receive Gangwal's comments till the time of this report going to press.

Among the main issues that Gangwal had raised was level of control of Bhatia and IGE on IndiGo and RPTs. "At the meeting last weekend, chairman Damodaran got the unanimous agreement of the board for increasing the number of members to 10 (from 6) that will include four independent (up from previous two) members. Five board members will be from IGE, including the IndiGo CEO, four independent and one Rakesh Gangwal," said sources.

"Bhatia had some time back suggested doubling the number of board members to 12 by increasing everyone's numbers proportionately (which would have meant the Gangwal faction getting two seats) but the proposal was not accepted. Now everyone has agreed for 10," said sources.

People in the know say with his stature, Damodaran - an ex-bureaucrat who headed Sebi, Unit Trust of India and Industrial Development Bank of India - managed to cool things down in the heated boardroom. His suggestions were by and large acceptable to the board.



Both Gangwal and Bhatia have about 38% stake in IndiGo. Gangwal had complained to Sebi, among other things, about Bhatia Group's control over IndiGo appointments - three out of six directors.

"These controlling rights give IGE Group, a minority shareholder, significant influence over the decisions of IndiGo and there is nothing wrong in that by itself, provided such influence is used judiciously and with prudence and is in the best interest of the company. I hadn't contemplated that over the years, Bhatia would start building an ecosystem of other companies that would enter into dozens of RPTs with IndiGo," says Gangwal's complaint to Sebi dated July 8.

IGE had countered this charge by saying the RPTs were disclosed at the time of IPO in 2015 and "materiality of the transactions for (IndiGo) is not significant as... it is only 0.53% of (IndiGo's) consolidated turnover for FY 2018-19."

Rahul Bhatia had got paan served at the board meeting last week, in a unique reply to Gangwal's retort that even a "paan ki dukaan" would have handled things better. This paan was served in a meeting that saw truce being brokered between the warring promoters by board chairman M Damodaran.

The earlier references to paan have been anything but 'meetha' in this corporate battle. Earlier this month, Bhatia family-controlled InterGlobe Enterprises (IGE) had said in a statement: "Paan ki dukaan has apparently done well and continues to do well. It is financially sound. It is well run and managed by a competent set of managers." IGE said in a statement. Gangwal had said a paan ki dukaan would have handled things better.