The feud between two co-founders of India’s leading airline IndiGo has now reached a turning point with one of them, Rakesh Gangwal, stepping down from the board and announcing plans to sell off his holding in the airline.
Gangwal has stepped down as non-executive, non-independent director of InterGlobe Aviation, the airline’s holding company, with immediate effect. He plans to scale down his holding at InterGlobe Aviation over a period of five years.
In his resignation letter, Gangwal stated, “My current intention is to slowly reduce my equity stake in the Company over the next five-plus years. While new investors should benefit from the potential future growth in the Company’s share price, a gradual reduction of my stake should also allow me to benefit from some of the upsides. Like any plan, future events may impact my current thinking.”
This development will provide the other co-founder, Rahul Bhatia, complete control over the airline. Gangwal’s decision comes after InterGlobe Aviation on February 4 announced the appointment of Bhatia as the managing director.
Bhatia and Gangwal had founded the airline in 2005, but over the past few years, they had a serious fallout. In July 2019, it came out in the open when Gangwal sought the intervention of the stock market regulator, Securities and Exchange Board of India, alleging that the company was not following its core principles and was sidelining him.
Later in 2020, Gangwal sought to modify certain rules in the company’s articles of association. He wanted to remove an article that prevented co-founders from buying publicly-listed shares in InterGlobe. Potentially that could have triggered an open offer for the rest of the company.
In December last year, InterGlobe Aviation shareholders approved changes to the articles of association, including scrapping rules that restricted the sale or transfer of shares to a third party. The passage of the special resolution led to the resolution of one dispute between the two co-founders.
Gangwal and his related entities own around 37% stake in InterGlobe Aviation, while Bhatia and his related entities own around 38%. Before joining hands with Bhatia to set up IndiGo airline, Gangwal had worked in various American airlines, including United Airlines and US Airways.
Meanwhile, with the salt-to-software conglomerate Tata Sons recently buying state-owned airline Air India and its budget airline subsidiary AI Express for 180 billion rupees (US$2.41 billion), IndiGo now faces competition for its leadership position. The Tata Group now owns four airlines – Air India, AI Express, AirAsia India, and Vistara.
The acquisition of a 90-plus-years-old legacy airline will provide Tatas control of 4,400 domestic and 1,800 international landing and parking slots.