The simmering differences between the two primary owners of IndiGo, India’s largest airline, have spilled into the open with accusations of mismanagement and a “hurt ego”, while the country’s civil aviation sector is facing turbulence with Jet Airways being grounded and the government struggling to sell off the loss-making state-owned carrier Air India.
Although the tussle between Rakesh Gangwal and Rahul Bhatia has been brewing for about a year, Gangwal has now sought the intervention of stock market regulator, the Securities and Exchange Board of India (SEBI). Shares of InterGlobe Aviation, the parent company of IndiGo, nosedived nearly 19% in early trade in the National Stock Exchange on Wednesday.
In his 23-page letter to SEBI Chairman Ajay Tyagi, Gangwal alleges that the company was ‘veering off’ from its core principles and values of governance and remarked that a ‘paan ki dukaan’ (a kiosk selling betel leaf preparation) would have managed matters with more grace.
Gangwal wrote about questionable transactions, which involve deals IndiGo entered into for the hotel accommodation of its crew, simulators for crew training, and the office space the airline uses.
He also said that fundamental governance norms and laws were not being adhered to and this would lead to “unfortunate outcomes” unless corrective action was taken. Corporate governance regulations prescribed by SEBI as well as those of the company’s code of conduct for directors and the senior management have been violated, he said.
Gangwal and his affiliates have about 37% stake in InterGlobe Aviation, while Bhatia and his affiliates (IGE Group) hold about 38% and the rest is held by the public. Bhatia and his group enjoy greater powers, which include appointing the chief executive officer and president of the company.
The market regulator has sought details from the Board of Directors of InterGlobe Aviation relating to the complaint filed by Gangwal and is expected to respond by July 19.
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In June, Gangwal wrote to the board of InterGlobe Aviation, seeking an extraordinary general meeting. Bhatia opposed the request and wrote to the board saying that Gangwal had raised the request due to his “hurt ego” and the refusal of IGE Group to entertain his “unreasonable demands”.
He said Gangwal’s allegations were an attempt to dilute control of IGE Group and to change the agreement that provides him (Bhatia) powers to make decisions, including appointing the chief executive officer and president of the company.
Bhatia also said that when Gangwal earlier raised these issues, the board had appointed consultancy firm Ernst & Young to look into all transactions and they found no irregularities.
Indigo was founded in 2006 and it went public in 2015. It is the country’s largest airline with a market share of 49%. The carrier has more than 200 planes and operates around 1,400 flights daily.