IndiGo share prices drop as promoters' battle comes to fore


One of the co-founders of India's largest airline IndiGo has alleged violation of corporate governance rules at parent company Interglobe Aviation Ltd and asked the securities regulator to intervene.

Gangwal has sought regulatory intervention from market regulator Sebi to resolve the issues.

A day after InterGlobe Aviation co-founder Rakesh Gangwal flagged concerns over governance matters, Rahul Bhatia's group Wednesday said that all related party transactions with the company have been executed at arms length basis in ordinary course of business.

Sebi has sought a reply from parent company Interglobe Aviation by July 19.

Gangwal alleges that the company is steering away from its core principles and values of governance and reportedly said that even a "paan ki dukaan" (betel shop) would have managed matters with more grace.

Experts also question the 2005 shareholder agreement between Gangwal and Bhatia and say such agreements don't work in favour of all the shareholders of a company.

He raised serious objections to related party transactions in the company, stating that various fundamental governance norms and laws were not being adhered to. Co-founder Rahul Bhatia and his affiliates (IGE Group) has around 38 per cent stake. This is between promoters Rakesh Gangwal and Rahul Bhatia.

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Amid the spat between the promoters, shares of IGAL plunged over 11 per cent on Wednesday wiping out Rs 6,423 crore from its market valuation.

Already, the aviation industry is grappling with multiple headwinds, including the shuttering of once-storied Jet Airways due to cash crunch.

According to Interglobe Aviation Ltd's articles of association (AoAs), Bhatia has a sweeping power in IndiGo such that shareholders and the company's board can not take any decision related to control, business transactions, or appointment of directors or key managerial personnel, without the approval of the Bhatia-controlled InterGlobe Enterprises, a Mint report states.

The IGE Group's rights include those to appoint three out of six directors, nominate and appoint Chairman, CEO, President as well as a voting arrangement that requires Gangwal and his affiliates to vote alongside the Group on appointment of directors, as per the letter.

The existence of RPTs was disclosed at the time of IndiGo's IPO in 2015 in the public domain and the transactions for IGAL are not significant because they are only 0.53 percent of IGAL's consolidated turnover for 2018-19, InterGlobe Enterprises said in a statement.

"However, we also firmly believe that IndiGo can only realise its true potential and be a world class company if it has both - a world class business and operational model as well as world class governance standards", the statement said.