Rahul Bhatia, promoter of IndiGo, is expected to use Tuesday’s annual general meeting (AGM) as a show of strength to assure minority shareholders that all was well with the country’s largest airline. This follows recent allegations of poor governance standards by co-promoter Rakesh Gangwal, who had compared IndiGo with a paan ki dukaan (betel shop). Gangwal, who lives in the US, will not be present at the meeting being held in New Delhi. At the AGM, IndiGo, through an ordinary resolution, will seek reappointment of M Damodaran as chairman of the company’s board for another five years.
While Gangwal may vote against the resolution, the Bhatia camp believes it would be passed as an ordinary resolution requires a simple majority or support of 50 per cent shareholders.
Gangwal, who along with his associates and family holds 37 per cent stake in the company, had questioned Damodaran’s independence. The appointment of Damodaran, former chairman of the Securities & Exchange Board of India (Sebi), will also strengthen Bhatia’s position in the ongoing feud between the promoters.
The duo, together holding 75 per cent stake, is credited with building the successful airline, which at present is worth about Rs 64,627 crore —many times more than the promoters’ initial investment. The founders, however, had a public spat after Gangwal wrote to Sebi in July, alleging lack of corporate governance in the company.
Gangwal alleged that Bhatia, who holds controlling power of the company, has used it to execute questionable related party transactions between his group company InterGlobe Enterprises (IGE) and IndiGo.
Over the last one month, Bhatia has met with several institutional shareholders assuring them that the company is maintaining high standard of corporate governance. “Most of the institutional shareholders have expressed satisfaction over the functioning of the company and have shown confidence in Damodaran’s ability. So, his reappointment is expected to sail through,” the person said.
The company is also seeking to expand the size of the board to 10 members, including four independent directors. Currently, the company's board has six members with two independent directors.
Gangwal had sometime back stated that he would vote against the resolutions of board expansion at the AGM. He reasoned that there would be periods in future when the company may have less than four independent directors due to retirement and resignation. This, Gangwal feels, will give partner Rahul Bhatia disproportional power to pass any policy.
But last week things took a turn, with indications of a truce for the time being. Gangwal said he would support the resolutions after the company’s board agreed that in future no important policy level decisions would be taken unless the board was present in full strength.