The boardroom battle within India’s most successful airline, Indigo, which appeared to have reached a ceasefire situation has flared up again. Rakesh Gangwal who, on paper holds almost the same level of equity stake in the airline as his co-founder Ramesh Bhatia, seems to have once again gone knocking on the doors of SEBI with a box of grievances and complaints.
This comes just days after both promoters reportedly called a truce. The report states that Gangwal has now written to SEBI seeking direction on various issues including related-party transactions (RPTs), non-independence of the current Chairman, refusal to hold the extraordinary general meeting when requisitioned by Gangwal and certain public statements made by the CEO of the company.
The centre of the dispute is an agreement the two promoters had entered into years ago when they set out to launch the budget airline. Ramesh Bhatia’s IGE agreed to bear the entire risk involved in the over Rs 1,000 crore investment being made in the airline. Rakesh Gangwal won’t be exposed to any risk as per this agreement. This also gave complete rights to Ramesh Bhatia to make all important decisions, including the appointment of independent directors on the board of the airline and so on.
Trouble erupted some months back when Rakesh Gangwal had written a long letter to the Chairman SEBI asking for his/SEBI’s intervention in what he called were serious governance issues in Indigo Aviation. One of the key issues he had raised then was on the related party transactions (RPTs) entered into by the company and he said these were against the accepted norms. He had raised some doubts about the independence of the independent directors as well, though he had said he had faith in the Chairman of the company, M Damodaran, himself a former SEBI Chief.
Ramesh Bhatia referred to the agreement and said he was well within his rights to make the decisions and he had obtained opinions from an auditor and a legal firm confirming that the related party transactions were very much in order and did not flout any norms. However, the two founders held meetings to find some common ground and accordingly certain solutions were worked out and taken to the board.
As per this new arrangement, the size of the board was to be increased to 10 and a sub-committee would be formed within the board to clear related party transactions. These decisions were ratified by the board in its last meeting and subsequently unanimously voted in the company’s AGM on August 27.
This sent out the message that the founders have resolved their dispute and all is honky dory.
Interestingly, Indigo’s business as an airline and that too the No.1 airline with around 50% market share, has not been affected by this trouble at the top. The operator has gone on to register growth both in terms of the flights handled as well as the financials.
Under these circumstances, Gangwal raising the red flag again just days after voting in favour of all the resolutions in the AGM does raise eyebrows.