Saturday, May 18, 2019

IndiGo’s billionaire troubles

Even before the blackish-grey Monsoon skies can arrive, turbulence in the Indian aviation sector has intensified. After Jet Airways ceased to operate in April due to financial stress, there’s trouble brewing at India’s biggest and most profitable airline IndiGo. But it’s trouble of a different kind — there are reports of “serious differences” between Rakesh Gangwal and Rahul Bhatia, the billionaire co-founders of IndiGo.

Their differences, according to a May 16 report in The Economic Times, are “over strategies and ambitions for the airline.” The report further stated that the co-founders have enlisted the help of law firms Khaitan & Co and J Sagar Associates to resolve their differences.

“If their differences are entirely operational, with each wanting the airline to take a different growth path, then it’s an unfortunate turn of events,” says Jitender Bhargava, former executive director of Air India. “Considering that they built the right business model, ran a profitable airline, and have placed a large fleet order.”

InterGlobe Aviation, the listed parent entity of IndiGo, has a market capitalisation of about $8 billion; Gangwal holds a 36.68% stake in the company and Bhatia 38.26%.

While Gangwal and Bhatia are media-shy, almost reclusive, they have been the driving force of the airline. Many in the industry credit IndiGo’s success to the behind-the-scenes work that the two have silently carried out — from buying and leasing aircraft to dealing with vendors.

“Aircraft purchase and leases has to be done at the promoter level. The promoter can best share the company’s vision and strategy, which helps in negotiating [beneficial] long-term contracts,” an airline industry veteran had earlier noted as being the key driver to IndiGo’s success.

While an e-mail query to IndiGo and Bhatia did not elicit a response, Gangwal, in an e-mail reply to Fortune India, said, “As you may or may not be aware, as a practice, I try my best to avoid interacting on press reports. Please forgive me for trying to be resolute on this issue.” He further added, “If there are issues that I feel the need to discuss with the press, I will be more than happy to have a discussion with you.”
17/05/19 Anshul Dhamija/Fortune India
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