The spat between founders of InterGlobe Aviation Limited, Rahul Bhatia and Rakesh Gangwal, finally became public. Rakesh Gangwal alleged severe corporate governance lapses against the company in a letter to the Securities and Exchange Board of India (SEBI).
Rakesh Gangwal owns 36.68% of stake in the company. He pointed out that even a ‘paan ki dukhaan’ (betel shop) would have managed the issues with more grace. He claimed that he tried to persuade the company to shore up its governance standards last year, but was unsuccessful. The other promoter, Rahul Bhatia and his InterGlobe Enterprises (IGE) hold 38% share in IndiGo.
According to Rakesh Gangwal, there are questionable transactions between IndiGo’s parent company and Rahul Bhatia’s IGE Group. He said that the deals had violated various governance norms, and many laws are not being adhered in the process. The company has started veering off from its core principles and values that made IndiGo what it is today, he claimed.
Rakesh Gangwal has sent the copy of the letter to SEBI to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, Civil Aviation Minister Hardeep Singh Puri and Commerce Minister Piyush Goyal.
SEBI has initiated a response from the Board of Directors of IndiGo. The team has to file the response by 19 July 2019. IGE, on the other hand, denied all allegations in a press release to the media.
According to the press statement issued by Bhatia, InterGlobe Aviation has related party transactions in four areas – real estate leased to InterGlobe Aviation; simulator training facilities; General sales agreement for limited foreign markets; and crew accommodation at Accor Hotels. All these four transactions accounted only 0.53% of the consolidated turnover of InterGlobe Aviation as per the audit performed in 2018-19, the statement claimed. It also said that these transactions are revealed at the time of IPO in 2015.
Rakesh Gangwal said that the SEBI has to scrutinize the EY report on related party transactions, which was earlier commissioned by the audit committee chairman in March. The report shows some procedural irregularities. However, according to Gangwal, the complete report has not been shared with the full audit committee and the Board.
Rakesh Gangwal said that he believes that IndiGo will not survive in the long-term without adhering to the governance norms, despite the excellent business model it practices. The shares of InterGlobe Aviation Limited, which runs IndiGo airline, fell 19% on Wednesday morning once SEBI sought the response from the Board.