IndiGo Unlikely to Lose Market Dominating Position Amidst Controversy Related to Promoters: Experts

The main concern of the investors is that IndiGo’s market share might decline as the airline might lose its focus from the growth trajectory which it has been on

By July 15th, 2019 AT 6:53 PM
Highlights
  • The controversy between promoters Rakesh Gangwal and Rahul Bhatia became public on July 9
  • The tussle might lead to slight bump in growth for the airline company

India’s biggest budget airline, IndiGo, owned by Interglobe Aviation has been caught in a new stifling position owing to its ongoing troubles inside the boardroom. This has led to doubts in the minds of the investors of the company who are now fearing that the company might spiral down following the tussle between the promoters and the other parties involved in this controversy. The main concern of the investors is that IndiGo’s market share might decline as the airline might lose its focus from the growth trajectory which it has been on. As per the experts, IndiGo will be able to defend its position owing to its massive fleet size, but even then, some slowdown can be expected from the airline.

IndiGo Likely to Witness Slowdown in Growth Owing to New Tussle 

Amit Tandon, co-founder and managing director of Mumbai-based Institutional Investor Advisory Services said that this is the kind of situation that might spin out of control. He added that it will now be the question whether or not the airline will continue to grow at a pace which it has caught or whether it will slow down as funding will be challenge.

The controversy spurted between the promoters Rakesh Gangwal, and Rahul Bhatia on July 9. Gangwal alleged some serious charges on the governance of the company. As per him, IndiGo had entered into various related-party transactions with the IGE Group, an affiliate of Bhatia’s, without seeking audit committee approvals or competitive bids. On this, Gangwal has now requested intervention from the industry regulator, DGCA and the securities exchange board of India. As per Tandon, if these authorities launch an investigation in the company then it will be a distraction for the aviation company away from the growth trajectory.

IndiGo’s Top Position to be Retained by the Airline as per Experts 

Harsh Vardhan, chairman of the Delhi-based aviation consultancy firm, Starair Consulting, told Quartz that this scene may lead to an environment of insecurity inside the company as Gangwal has brought a lot to the table in IndiGo. Harsh Vardhan also said that it was because of him that IndiGo was able to procure 100 aircrafts from Airbus in 2014. Other experts have also agreed that the timing of this controversy is concerning too as the airline has been known to add a new aircraft every week and has been on a fleet ramping operation for quite some time now. Now in such a case, the new tussle might prove to be a hindrance to the growth.

Now the question is whether the rivals in the airline business will see this as a time of weakness for IndiGo and blow the hammer. To this, IndiGo CEO Ronojoy Dutta in a letter dated July 11 has said that issued will be sorted out and they won’t have an effect on the running of the airline. Experts have also said that some slowdown in growth and a small dent in market share is possible, but even then, the rivals are far from dethroning IndiGo from its top position in the industry. IndiGo boasts of 49% market share in the industry, whereas SpiceJet has 14% market share followed by Vistara’s 4.7%.

Whenever Arpit boards a plane he is filled with awe and bewilderment and soaring above the skies is something marvellous for him. An aviation and tech geek through and through Arpit writes at AviationScoop not only because he's experienced and good at his craft but also because flying is something which makes his heart flutter with joy.

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