A high-pitched boardroom tussle is unravelling at India’s largest airline, IndiGo.
Investors have been spooked by concerns that the company’s management is losing focus and rivals may dent the airline’s market share, which stood at 49% in May. While IndiGo’s formidable lead in the market and fleet size may help it fend off competition, some slowdown is a given, say experts.
“This has the makings of a situation that can spin out of control. It’s to be seen now whether the airline will continue to grow and expand at a pace it has been growing in the past or not—as funding will be a challenge,” said Amit Tandon, co-founder and managing director of Mumbai-based Institutional Investor Advisory Services.
The feud between IndiGo’s promoters Rakesh Gangwal and Rahul Bhatia became public on July 9. Gangwal had levelled serious charges of a lapse in governance. He said IndiGo had entered into various related-party transactions (RPT) with the IGE Group, an “affiliate” of Bhatia, without seeking audit committee approvals or competitive bids and sought intervention (pdf) from the market watchdog, securities and exchange board of India (Sebi).
“If Sebi and other regulatory agencies start an investigation then this will be a distraction for the management and will slow down the airline’s growth,” said Tandon.
Given Gangwal’s role in the airline, the issues may create an environment of insecurity. “IndiGo has grown because of what Gangwal brought to the table. His backing helped the airline procure 100 aircraft from Airbus (in 2014). He holds a strong influence in the airline,” Harsh Vardhan, chairman of the Delhi-based aviation consultancy firm, Starair Consulting, told Quartz. “The lessors, third-party suppliers, and other stakeholders involved with IndiGo may rethink their ties to the carrier.”
12/07/19 Niharika Sharma/Quartz
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Investors have been spooked by concerns that the company’s management is losing focus and rivals may dent the airline’s market share, which stood at 49% in May. While IndiGo’s formidable lead in the market and fleet size may help it fend off competition, some slowdown is a given, say experts.
“This has the makings of a situation that can spin out of control. It’s to be seen now whether the airline will continue to grow and expand at a pace it has been growing in the past or not—as funding will be a challenge,” said Amit Tandon, co-founder and managing director of Mumbai-based Institutional Investor Advisory Services.
The feud between IndiGo’s promoters Rakesh Gangwal and Rahul Bhatia became public on July 9. Gangwal had levelled serious charges of a lapse in governance. He said IndiGo had entered into various related-party transactions (RPT) with the IGE Group, an “affiliate” of Bhatia, without seeking audit committee approvals or competitive bids and sought intervention (pdf) from the market watchdog, securities and exchange board of India (Sebi).
“If Sebi and other regulatory agencies start an investigation then this will be a distraction for the management and will slow down the airline’s growth,” said Tandon.
Given Gangwal’s role in the airline, the issues may create an environment of insecurity. “IndiGo has grown because of what Gangwal brought to the table. His backing helped the airline procure 100 aircraft from Airbus (in 2014). He holds a strong influence in the airline,” Harsh Vardhan, chairman of the Delhi-based aviation consultancy firm, Starair Consulting, told Quartz. “The lessors, third-party suppliers, and other stakeholders involved with IndiGo may rethink their ties to the carrier.”
12/07/19 Niharika Sharma/Quartz
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