Gangwal’s letter to Sebi shows promoters truce is a fragile one

The truce between the promoters of IndiGo has been a fragile one. Days after the airline’s chief executive Ronojoy Dutta told employees that disagreement between promoters Rahul Bhatia and Rakesh Gangwal has been resolved, it has emerged that the airline’s co-founder Gangwal has written to Securities and Exchange Board of India (Sebi) on 30 August seeking directions from capital markets regulator on a slew of contentious issues.

These include past related party transactions (RPTs) involving the airline, non-independence of chairman Meleveetil Damodaran and his refusal to hold the extraordinary general meeting (EGM) when requested by board members, certain public statements made by chief executive Ronojoy Dutta and amendment to the Articles of Association of the Company to remove certain rights of the IGE Group.

On Wednesday, IndiGo said in a stock exchange notification that it will provide its response to Sebi.

“As previously disclosed, at the recent AGM (annual general meeting) of the company held on August 27, 2019, both the promoter groups have voted in favour of all the resolutions, including the resolutions to amend the Articles of Association (AoA) of the company to expand the size of the board to 10 members and to appoint the chairman as an independent director of the company,” IndiGo said.

“Further, as on date, the company has in place a revised RPT Policy as approved by the company’s Audit committee and the Board of Directors,” it added.

Mint had on 27 August reported that the airline’s co-founder and co-promoter Gangwal agreed to support the proposed changes at the AGM after some of his demands, including on board expansion and related-party transactions (RPTs), were accepted, ending months of public wrangling.

Gangwal had earlier objected to the board expansion as he contended that in the absence or resignation of an independent director, co-founder Rahul Bhatia’s InterGlobe Enterprises Pvt. Ltd (IGE) would have an unfair advantage in approving key policy changes since it has five directors representing it.

After the airline’s AGM on 27 August, which saw both promoters group vote in favour of all resolutions, it was widely reported that a truce has been reached between the warring founders of the airline.

“Truce is a strange word to describe the situation,” said a person directly aware of the matter requesting anonymity.

“As far RPTs are concerned, solution has been found, which has satisfied both promoters. The complaints raised by Gangwal with Sebi and other regulators is still an open issue though, which will likely be investigated,” the person added.

Gangwal and his associates hold nearly 37% in InterGlobe Aviation, while Bhatia’s InterGlobe Enterprise (IGE) owns around 38%.

Although the two groups own roughly similar stakes, an initial agreement gave special rights to Bhatia’s IGE Group.

On 8 July, Gangwal wrote to markets regulator Sebi seeking its intervention on corporate governance issues.

Gangwal, in his letter, flagged concerns about certain RPTs and said the shareholders’ agreement provides co-promoter Bhatia with unusual controlling rights over IndiGo. Bhatia has denied the allegations.

First Published: Sep 04, 2019 17:14 IST