Photo: AFP

The ongoing feud between the two promoters of India’s largest airline, IndiGo, is far from over as the latest letter from one of the promoters, Rakesh Gangwal, reveals.

Although the tussle between Gangwal and the other promoter, Rahul Bhatia, has been brewing for about a year, matters came to head in early July when the former sought the intervention of stock market regulator Securities and Exchange Board of India. Gangwal had alleged that the company was not following its core principles and he was being sidelined.

Gangwal’s Rakesh Gangwal Group holds a 37% stake in the company, while Rahul Bhatia’s InterGlobe Enterprises holds 38% and the rest is held by the public.

But Bhatia wields much greater control over the board and management. While Inter-Globe Enterprises has the right to appoint key managerial personnel, including the chairman, managing director, CEO, and president and also three non-independent directors, Rakesh Gangwal Group has the right to nominate just one non-independent director.

In the last week of July, there were reports of a truce between the two promoters, brokered by IndiGo chairman M. Damodaran. The strength of the board has been increased to 10 from six.

However, even in the proposed board, the Bhatia camp continued to have an upper hand with power to nominate five board members, including chief executive officer. The number of independent directors was increased to four. Gangwal will continue to be the only representative from his side, and will not nominate any director.

Also Read: India’s IndiGo promoters reach a compromise

The rules for related-party transactions were, however, changed and competitive bidding process was made mandatory for those over 20 million rupees.

In his latest letter (dated August 5) to the board of directors, Gangwal has stated that there are still disagreements between him and Rahul Bhatia’s InterGlobe Enterprises with regard to related-party transaction policy and board composition as he feared that the new agreement would bestow upon his co-promoter even greater powers than he enjoyed earlier.

“I again reiterate that I am no longer in a position to vote affirmatively on the special resolution for ‘alteration in articles of association of the company,’ unless as discussed in numerous emails (i) a complementary board resolution is passed to prevent InterGlobe Enterprises group from getting even more rights and abilities than they have today (ii) the new related-party transaction policy is adopted, language for which has already been agreed,” Gangwal said in his letter, CNBC TV18 reports.

The change in articles of association is required to increase the company’s board size to include more directors.

When the company was incorporated, the shareholders’ agreement was heavily skewed in favor of Bhatia in terms of appointment of chairman, directors and top management.

Gangwal has alleged these rights have been misused. Bhatia has refuted the allegations and said InterGlobe Enterprises has, time and again, made the most critical investments in IndiGo.

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