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IndiGo CEO Assures Employees As Promoters Feud In Public: 10 Points

The development comes as a fresh sign of escalating tensions between the company's estranged co-founders, Rakesh Gangwal and Rahul Bhatia.

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IndiGo CEO Assures Employees As Promoters Feud In Public: 10 Points

Sebi has asked InterGlobe - the parent company of IndiGo - to respond to the letter by July 19

India's largest airline IndiGo, a rare success story in the challenging aviation industry, is caught in a messy feud between its founders. Shares in InterGlobe Aviation - the owner of IndiGo - fell as much as 19 per cent on Wednesday after one of its founders, Rakesh Gangwal, sought regulatory intervention in alleged misgovernance, targeting his long-time friend and co-founder Rahul Bhatia. In a letter to market regulator Sebi, Mr Gangwal alleged serious violation of corporate governance rules, saying the company has "started veering off" from its core principles and values. Along with their affiliates, Mr Gangwal and Mr Bhatia each hold a more than 35 per cent stake in the company - which means both have a major say in the company's strategy and plans. Chief executive officer Ronojoy Dutta said, in a letter to employees, that the airline's mission, direction and growth strategy remain unchanged.
Here is the big story explained in 10 points:
  1. In his letter to Sebi dated July 8, Mr Gangwal sought the market regulator's intervention, in a move that suggested that a previously reported row between the estranged co-founders was escalating. The market regulator asked the company to respond to the letter by July 19, according to a regulatory filing by InterGlobe Aviation on Tuesday.
  2. Even a "paan ki dukaan" (betel shop) would have managed matters "with more grace", Mr Gangwal wrote while referring to various events at the company, Mr Gangwal wrote in his letter, copied to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman besides other ministers and bureaucrats.
  3. InterGlobe shares nosedived to their lowest intraday level recorded since March in today's session before closing 11.13 per cent or Rs 174.30 lower at Rs 1,392 on the NSE. (Check IndiGo share price here)
  4. CEO Mr Dutta told the company's employees that the issues between promoters have nothing to do with airline and its functioning. (Also read: Rakesh Gangwal has no plans of taking control of IndiGo, says CEO)
  5. Reports of the alleged conflict between Mr Gangwal and Mr Bhatia first emerged in May this year, which were denied by the airline.
  6. Mr Gangwal accused Mr Bhatia and his firms of indulging in questionable related-party transactions (RPTs), and proposed an extraordinary general meeting with shareholders. In a statement late on Wednesday, Rahul Bhatia's InterGlobe Enterprises (IGE) said that all transactions with the company have been executed on an arms' length basis in the ordinary course of business.
  7. The matter relates to a spat between the co-founders over payment of rent for the airline's headquarters owned by Mr Bhatia's InterGlobe Enterprises, and crew staying at hotels where InterGlobe Enterprises has a stake.
  8. Mr Gangwal has alleged that over the years, Mr Bhatia began building "an ecosystem of other companies that would enter into dozens of related party transactions" with the airline. "We are not against RPTs as long as proper checks and balances exist and such RPTs are in the best interest of the Company," Mr Gangwal wrote in his letter.
  9. InterGlobe Enterprises further said that the group has "nurtured and supported" InterGlobe Aviation through its "formative and expansion years by making available these services".
  10. Mr Bhatia had earlier opposed the proposal by Mr Gangwal seeking an extraordinary general meeting of the board. Mr Bhatia wrote to the board alleging that the genesis of Mr Gangwal's angst was his "hurt ego" and refusal of IGE Group to entertain his "unreasonable demands".

(With inputs from agencies)





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Highlights

1
InterGlobe Aviation shares fell to lowest intraday level in three months
2
Feud between Rakesh Gangwal, Rahul Bhatia became public on Tuesday
3
IndiGo's mission, direction, growth strategy remain unchanged, says CEO

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