IndiGo tension simmers

Promoters disagreeing over growth strategy and ambitions for airline

  • Published 17.05.19, 12:55 AM
  • Updated 17.05.19, 12:55 AM
  • 2 mins read
  •  
InterGlobe Aviation owns and manages IndiGo Airlines, which has around a 47 per cent share in the domestic passenger market. (Shutterstock)

The fissures that have emerged between the two promoters of IndiGo — Rahul Bhatia and Rakesh Gangwal — could see the carrier landing up at the National Company Law Tribunal if the board is not able to resolve the dispute even as the CEO of the budget carrier tried to lift the confidence of investors and flyers.

CEO Ronojoy Dutta’s assurances could not prevent the shares of IndiGo from going into a free fall. The stock dropped 8.82 per cent to close at Rs 1,466.60 on the BSE. During the day, it tanked 9.82 per cent to Rs 1,450.50. The company’s market valuation dropped Rs 5,455.89 crore to Rs 56,377.11 crore on the BSE.

Dutta in an email to his employees on Thursday said, “I want to assure you that the growth strategy of the airline remains unchanged and firmly in place, and the management is fully charged by the board to implement it.”

The IndiGo CEO referred to media reports in the communication. “I am sure that you are all aware of the press reports regarding alleged disagreements between our two promoters Rahul Bhatia and Rakesh Gangwal,” he said.

InterGlobe Aviation owns and manages IndiGo Airlines, which has around a 47 per cent share in the domestic market.

According to media reports, serious differences have cropped up between the two chief promoters over the strategies . On a query from The Telegraph, IndiGo said the company would not make any statement on the subject.

Gangwal and Bhatia have different strategies for the expansion of the airline, reports suggest.

The closure of troubled Jet Airways, besides the financial woes at Air India, has left a gap that provides an opportunity for other airlines.

While Bhatia prefers purchasing wide-bodied aircraft for international flights, Gangwal wants to stick to narrow-bodied Boeing 737. Gangwal thinks codeshare agreements with foreign airlines are a better option.

The board-level appointments are also a bone of contention, reports said.

Gangwal and Bhatia are now taking help from law firms J Sagar Associates and Khatian & Co, respectively, to thrash out their differences.

Pavan Kumar Vijay, founder of advisory firm Corporate Professionals, said the issue would first go to the board. If the dispute is not resolved, it could go before the tribunal.

The two founders are battling each other over control of the board and the company’s affairs with independent directors caught in the cross fire. Gangwal owns around 37 per cent of InterGlobe Aviation, while Bhatia holds around 38 per cent in the company.

Aviation analyst Mark Martin said, “The issue should be handled in a mature manner with the board resolving the issue rather than law firms being involved. IndiGo is the largest airline in the country and if the spat intensifies,it would have a significant dent on the aviation sector.”

Analysts said the promoters could accuse one another of running the company in a prejudicial manner.

Section 241 of the Companies Act 2013 deals with issues relating to mismanagement and oppression of shareholder rights.

Meanwhile, Qatar Airways, which has sought additional seat capacity on a temporary basis for its flights from Indian cities to Doha, on Thursday said it will “seriously” consider any proposal for partnership from Indian carriers.