IndiGo promoters' battle turns ugly, Gangwal seeks SEBI's intervention

Low-cost carrier IndiGo's Co-Founder Rakesh Gangwal has sought intervention by the Securities and Exchange Board of India (SEBI) to curb alleged corporate governance violations by his colleague Rahul Bhatia, a move that could threaten expansion plans of the country's largest airline.

Gangwal, who holds 37 per cent in the parent company InterGlobe Aviation, said in a letter to SEBI Chairman Ajay Tyagi that a shareholders' agreement between himself and Bhatia gave the latter unusual controlling rights over IndiGo. These rights and a lack of diversity and paucity of independent directors may very well be at the root of why governance matters have taken such a back seat at IndiGo, he said.

"IndiGo is at a watershed moment. It has started veering off from the core principles and values of governance that made IndiGo what it is today," said Gangwal in the letter which was also sent to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, Minister for Commerce and Industry Piyush Goyal, Civil Aviation Minister Hardeep Puri and Director General of Civil Aviation Arun Kumar. Gangwal alleged that over the years, Bhatia (who also holds about 37 per cent stake in the company) began "building an ecosystem of other companies that would enter into dozens of related party transactions with IndiGo."

Gangwal alleged that various related party transactions with the IGE Group were executed without seeking audit committee approval and many were executed without seeking competitive bids from third parties. He said many had been signed with retrospective effect.

"I request SEBI to look into and, if thought fit, ask the company to make necessary changes to the unusual controlling rights available to the IGE Group, a minority shareholder with about 38 per cent shareholding. These unusual rights survive even after this coming November when most of the provisions of the current shareholders agreement expire since these rights remain embedded in the articles of association of IndiGo and will continue to survive unless the articles are amended by a vote of shareholders holding more than 75 per cent shares."

Gangwal said he vigorously attempted for almost a year to persuade the company to shore up its governance standards and all his attempts were thwarted by the IGE Group. He mentioned whistleblowers who had the courage and wisdom to send information that allowed for this pursuit of almost a year.

Gangwal said IndiGo is a critical national asset and serves almost 50 per cent of the domestic air travellers.

"The aviation industry in India has regrettably experienced a checkered and difficult financial history and especially in the context that these unusual controlling rights seem to be the basis for the various violations of law and governance at IndiGo. The nation can ill afford IndiGo to ever falter," he said in the letter.

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