IndiGo investors pay for spat
Shares of InterGlobe Aviation on Wednesday crashed over 11 per cent after a spat between its co-promoters became public. The sharp fall in the price, though expected, wiped off over Rs 6,400 crore in investor wealth. InterGlobe is the parent of IndiGo, India’s No. 1 airline.
InterGlobe Aviation Limited (IGAL) fell 10.73 per cent on the BSE to close at Rs 1,397.75 after diving 17.54 per cent intra-day to Rs 1,291. On the NSE, the scrip ended 11.12 per cent lower at Rs 1,392. Earlier in the session, it tanked 19.24 per cent to Rs 1,264.85.
The company’s market valuation declined Rs 6,422.6 crore to Rs 53,765.40 crore on the BSE.
As many as 10 lakh InterGlobe shares were traded on the BSE and over one crore on the NSE during the day. InterGlobe on Tuesday said its promoter Rakesh Gangwal had sought Sebi’s intervention in addressing his grievances against co-promoter Rahul Bhatia. The market regulator had asked InterGlobe to submit its response by July 19.
The feud between founders Gangwal and Bhatia is an outcome of the related party transactions (RPTs) that the company had with the IGE group, which represents Bhatia and his affiliates.
Gangwal, who along with his affiliates hold 37 per cent in the firm, have questioned these transactions. He alleged the deals were executed without seeking approval of the audit committee. Neither were competitive bids taken from other parties.
Bhatia had countered saying IndiGo had received the most favoured treatment in each RPT. Bhatia and his affiliates (the IGE group) have about 38 per cent in the company.
On Wednesday, Bhatia’s said all the transactions had been executed at arms length basis in the ordinary course of business.
Bhatia’s InterGlobe Enterprises added that there were related party transactions in four areas — real estate leased to IGAL, simulator training facilities, general sales agreements for limited foreign markets and crew accommodation.
Citing the financial numbers for 2018-19, the statement said the related party transactions in the four areas accounted for Rs 150.12 crore, or 0.53 per cent of IGAL’s consolidated turnover, and that the significance of these transactions for InterGlobe was not high.
The statement added that the existence of the RPTs was disclosed at the time of IGAL’s maiden offer in 2015 and since then, many of them have ceased to exist while others have been renewed at arms length basis.
“All related party transactions have been executed on an arms’ length basis and in the ordinary course of business. The IGE Group has nurtured and supported IGAL through its formative and expansion years by making available these services,” it noted.
Meanwhile, the CEO of IndiGo said that issues between promoters had nothing to do with the airline and its functioning.
“The issues between them will eventually get sorted out but I want to stress that these issues have nothing to do with the airline and its functioning,” Ronojoy Dutta said in a communication to employees.
He said the the airline’s mission, direction and growth strategy remains unchanged, and firmly in place.
“It is important that we all remain focused on running a high performance airline,” he said in the letter.
“Absolutely nothing has really changed for any of us, I will just go about doing my job to the best of my abilities, and I know I can count on you to do the same,” he said.