India: IndiGo co-promoter Gangwal questions chairman in letter

The Rs3,010 crore IndiGo IPO, which closed on 29 October, was subscribed 6.14 times, as financial institutions and high networth individuals sought to tap the world’s fastest growing aviation market through the issue. Photo: Mint

InterGlobe Aviation Ltd’s co-promoter Rakesh Gangwal has questioned chairman M. Damodaran for not adopting the agreed related-party transactions (RPTs) policy, and calling board and committee meetings after the company’s annual general meeting (AGM) slated for 27 August.

In a 6 August letter addressed to Damodaran, board members of InterGlobe Aviation-run IndiGo and the airline’s chief executive officer Ronojoy Dutta, Gangwal said Damodaran’s sense of urgency to call board and committee meetings after the AGM is “perplexing”.

“What I fail to understand is why all this was not initiated since the last exchange of proposals on July 24, 2019 and why not now and prior to the AGM? Or why the agreed RPT Policy is not being adopted now,” Gangwal said in his letter, adding that closing the remaining large loophole requires no more than a few days of work.

A copy of the letter has been reviewed by Mint. 

“Again, I urge you to follow through on what was agreed at the board meeting and after the board meeting, and prior to the AGM,” Gangwal said adding that he is unable to support the special resolution on the articles (including ones to increase board strength to 10 members from existing six members) without closing the large loophole.

Gangwal and his associates hold nearly 37% in InterGlobe Aviation, while co-founder Rahul Bhatia’s InterGlobe Enterprises Ltd (IGE) holds around 38%. Although the two groups own roughly similar stakes, an initial agreement gave special rights to Bhatia’s IGE Group.

Gangwal has accused Bhatia of violating corporate governance norms and has sought more independent directors on the board. Bhatia has denied the allegations.

Gangwal said, in his letter, that both the warring promoters have agreed on policies related to RPTs, size of the board and its composition as well as having an independent women director, closing the large loophole during the transition period.

In his letter, Gangwal said that after the transition period, it is inevitable that there will be times (in event of resignation of an independent board member) when the IGE group directors by themselves will outnumber all the independent directors and Gangwal combine, which is not a desirable outcome.

“As for your comments about fiduciary responsibilities of all directors, let me just say, checks and balances are important, and I ask why have an independent director as chair of audit committee or even have independent directors on board of listed companies—we should leave it to the fiduciary responsibilities of the promoter directors,” Gangwal added.

Damodaran had in a 5 August letter to the board of the company stated that “the fear that in the interim that the IGE Group will push through questionable decisions, does no credit to the independent directors that will be on the board, or to the fiduciary responsibilities of the directors including those nominated by the IGE Group”.

Gangwal termed this statement from Damodaran as “flawed”.

He said he will oppose the special resolution at the AGM unless another resolution is passed by the board to prevent the IGE Group from attaining more power and until a new policy on RPT is adopted by the company. InterGlobe’s independent director Anupam Khanna has similarly asked the IndiGo chairman to defer policy decisions till the airline’s board has a full complement of four independent directors to safeguard the interests of minority shareholders.

In a 5 August letter addressed to Damodaran, Khanna questioned the decision of the chairman to set meetings between directors and promoters after AGM and not before it.

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