While the two major shareholders of India’s largest airline IndiGo – Rakesh Gangwal and Rahul Bhatia – harden their positions over accusations of mismanagement, the board of InterGlobe Aviation Ltd, the parent company of the airline, has summoned Gangwal to its board meeting on July 19.
The board is likely to ask Gangwal why he did not try to solve the dispute at the board level and why he went public, Business Standard reports.
In a letter to stock market regulator Securities and Exchange Board of India (SEBI), Gangwal had said that IndiGo was not following the company’s code of conduct and not conforming to the corporate governance standards laid down by the stock market regulator.
Gangwal’s Rakesh Gangwal Group holds a 37% stake in the company, while Bhatia’s InterGlobe Enterprises holds 38%. But Bhatia wields much greater control over the board and management.
His holding company Inter-Globe Enterprises (IGE) has the right to appoint key managerial personnel, including the chairman, managing director, CEO, and president. It also has the right to nominate three non-independent directors, and one will be non-retiring. The Rakesh Gangwal Group, on the other hand, has the right to nominate just one non-independent director, who will be a non-retiring director.
In the recent past, Gangwal had also been dissatisfied over a clause in the company’s articles of association which binds him to support the IGE group’s choice of executives including the chief executive officer, president, and chairman. He agreed to it in the past, but now wants it changed.
However, Bhatia has argued that he has played a more significant role and undertaken financial risks in running the airline, while Gangwal limited his role. He said that during the initial years of the company he and his father Kapil Bhatia had provided more than 11 billion rupees (US$ 160 million), while Gangwal’s equity exposure was 150 million rupees ($ 2.19 million).
Some IndiGo board members are expected to ask Gangwal about the nature of talks he reportedly had with aircraft engine maker Pratt & Whitney ahead of the airline’s latest engine order, Economic Times reports. Pratt & Whitney has historically been the engine supplier for all of IndiGo’s Airbus planes. But the latest $20 billion order was given to rival CFM, a joint venture between GE and France’s Safran, after a competitive bidding process.
Apart from Bhatia and Gangwal, IndiGo’s board currently has former SEBI chief M. Damodaran as its chairman, and Bhatia’s wife Rohini Bhatia, InterGlobe Technology president Anil Parashar and former World Bank executive Anupam Khanna as independent directors.