India's biggest airline IndiGo may have just made a u-turn from a disastrous ride towards crash-landing as co-promoters Rahul Bhatia and Rakesh Gangwal have shown the intent to reconcile their differences. The spat between the two had been threatening to take the budget carrier down the path that could have hit the airline's governance bringing to fore comparison with the defunct Jet Airways and Kingfisher Airlines.
Media reports suggest the latest board meeting showed signs of the two businessmen, who together share more almost 75 percent of the company's take, thrashing out their differences. The meeting on Friday and Saturday that took stock of the June quarter earnings of the company also discussed some of the issues Gangwal had raised.
IndiGo shares were buoyed by the smooth conduct of the board meeting and rose Rs 65 or 4.44 percent from Friday's close of Rs 1,462 to close on Tuesday at Rs 1,527.
Gangwal had tried to get the government and the securities regulator involved in the matter. He wrote to Prime Minister Narendra Modi's office, Finance Minister Nirmala Sitharaman, and the Securities and Exchange Board of India (Sebi) alleging irregularities in the related party transactions (RPT) of the airline with the InterGlobe Enterprises (IGE) Group of Bhatia. Gangwal had also sought the expansion of the board.
"Two things have happened which are significant (in the board meeting on July 20)," a report in the Financial Express said, citing unidentified sources close to Gangwal. "Firstly, the resolution (was made) on the appointment of an independent woman director which was a regulatory requirement, and decision to induct two more independent directors to strengthen the functioning of the board," the source said. "The meeting was a cordial one. The issues regarding the strengthening of corporate governance were discussed. Things are moving in the right direction."
IndiGo said in a statement on Sunday said it would amend its Article of Association (AoA) for expanding its board size to 10 that includes the appointment of an independent woman director as mandated by Sebi, the report said.
The AGM is expected to be held in the last week of August. The expansion of the board has been a contentious issue between Gangwal and Bhatia. The Bhatia camp had been viewing the demand for inducting more independent members on the board as an attempt to dilute the controlling rights of his IGE Group.
The airline's board now has six members of which three are Bhatia's nominees and one of Gangwal. The rest are independent directors. "The unusual rights available to the IGE Group in conjunction with the lack of diversity and paucity of independent directors in the board may very well be at the root of why governance matters have taken such a back seat at IndiGo," Gangwal had written in his letter to Sebi on July 8.