Bhatia vs Gangwal: IndiGo promoters' first right of refusal ends on Nov 9

The two sides led by Rahul Bhatia and Rakesh Gangwal are discussing possible changes in shareholders' agreement

IndiGo promoters Rahul Bhatia and Rakesh Gangwal can exercise their “first right of refusal” only till November 9, 2019, in case one of them decides to sell his shares to a third party. 

After the expiry of the deadline, both the promoters will be free to sell their shares without such restriction, according to the shareholders’ agreement and the articles of association, unless the agreement is reworked. 

The two sides through their law firms — JSA Law for Bhatia, and Khaitan & Co for Gangwal — are discussing possible changes in the shareholders’ agreement, sources said.  

The IGE group (Rahul Bhatia and family) owned 38.26 per cent in IndiGo while the RG group (Gangwal family and their trusts as well as well as J P Morgan Trust Company) held 36.68 per cent as of March 31, 2019. The remaining shareholding is held by the public, mutual funds, foreign institutions, financial institutions, public and others.  

According to the prospectus for the initial public offering (IPO) pursuant to the articles of association and the shareholders’ agreement dated April 23, 2015 and amended on September 17, 2015, the agreement grants the IGE and RG groups “rights to first refusal to any of our equity shares proposed to be transferred by the other group to any third party, including through transfers of our equity shares other than through the stock exchange”. 

The shareholders’ agreement also gives the IGE group the right to nominate three non-independent directors, and the RG group one non-independent director. One director each of the two groups, however, can become a non-retiring director. The IGE group also has the right to appoint the top brass — chairman of the board, CEO, managing director and president of the company. However, the shareholders have to endorse the appointment of MD. In the case of CEO and president, the board also needs to clear the appointment. It is believed that this arrangement might also come under discussion among the law firms for possible changes.

An IndiGo spokesperson did not response to a query as the company is going through ‘a silent period’. However, analysts point out that both the promoters have not made any attempt to sell their stakes after the IPO.