Indigo promoters Rahul Bhatia, Rakesh Gangwal may call truce soon

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Updated: August 28, 2019 7:17:29 AM

Meanwhile, the company’s CEO, Ronojoy Dutta, told the shareholders categorically that all related-party transactions (RPTs) have been executed at an arm’s length and amounted to less than 1% of the company’s total revenues.

Another notable absentee was independent director Anupam Khanna, who sided with Gangwal’s reservations on the issue of expansion of the board in a manner which gives more power to Bhatia at certain times.

The much-awaited annual general meeting (AGM) of InterGlobe Aviation, which runs the low-cost carrier, IndiGo, took place on Tuesday but minus any fireworks, in which the co-promoters —Rakesh Gangwal and Rahul Bhatia — have been indulging in for the past one-and-a-half months.

Gangwal, who has raised issues related to corporate governance at the airline and sent missives to the Securities and Exchange Board of India (Sebi) and the ministry of corporate affairs, was not present during the meet as he was in the US. Another notable absentee was independent director Anupam Khanna, who sided with Gangwal’s reservations on the issue of expansion of the board in a manner which gives more power to Bhatia at certain times.

Meanwhile, the company’s CEO, Ronojoy Dutta, told the shareholders categorically that all related-party transactions (RPTs) have been executed at an arm’s length and amounted to less than 1% of the company’s total revenues.

He said the value of RPTs that the company has signed is about Rs 156 crore, which is less than 1% of the company’s total revenues of Rs 30,000 crore. Dutta also said no whistleblower has ever complained on violations of corporate governance norms.  “There is not a single case, where RPT is not at arm’s length. All RPTs were improved by audit committee as well,” Dutta said.

On his part, Bhatia said he feels that Gangwal is trying to make peace. “In a recent statement he (Gangwal) has talked about mending fences. I think his actions will speak louder than his words (website) over time,” Bhatia said.

The reference was to Gangwal starting a website — governanceindia.com — earlier this month to issue his statements. “I hope his (Gangwal’s) actions will start speaking louder than his website over time… IndiGo is reaching a point where it can stand on its own,” Bhatia said.

On the future expansion, Dutta said the company plans to grow by about 30% a year for the next few years and would look at planes like Airbus A321XLR and wide-body aircraft. “We expect that half of that growth (in capacity) will go international, half will go domestic. We are very optimistic about international” he added.

IndiGo board chairman M Damodaran said he is optimistic that the two promoters will resolve their differences soon. On August 23, Gangwal had said since IndiGo had approved a new RPT policy and resolved the earlier issues he would now vote in favour of the proposed changes to the articles of association. While Gangwal, his wife and his family trust own 37.02% shares in the airline, Bhatia’s IGE group controls 37.92% and the remainder is with the public.

On July 8, Gangwal had accused Bhatia’s InterGlobe Enterprises (IGE) of corporate misgovernance along with executing illegal RPTs with the airline. Bhatia has refuted all allegations and called it an attempt to dilute the controlling rights of the IGE group over IndiGo.
Gangwal, an airline industry veteran, had demanded a new policy for entering into RPTs and increase in the number of directors on the board. Following several rounds of discussions, on July 20, the IndiGo board decided to expand the board from the current six members to ten and agreed to amend the RPT policy.

When it appeared that the two promoters had resolved their differences, Gangwal went public again on August 6 claiming that large loopholes remained in the proposed changes, and said he would not vote in favour of them. Gangwal’s support was necessary to adopt the changes to the AoA as special resolution item requires nod from at least 75% of the shareholders.

Gangwal’s main grouse regarding the board expansion to 10 was that if a position of an independent director falls vacant at any time the size of the board will be in favour of IGE which can during the interim period force through its policies.

Though the apprehensions by Gangwal received support from Khanna, Damodaran had rejected the allegations. Khanna had asked the board to consider Gangwal’s suggestions which included expanding the board size to 7.

The current six-member board of IndiGo has three IGE nominees, one Gangwal’s appointee and two independent directors. Once the board expanded to ten members, IGE’s nominees would go up to five, Gangwal’s will remain at one, while four independent directors would be appointed, one of whom would be woman.

On Tuesday, IndiGo’s shares closed down 1.85% at Rs 1,649 on the BSE.

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