Making a case for increasing the number of directors on the IndiGo Airlines board, especially the independent ones, proxy advisory firm IiAs has pointed out that the current board is “silent” and its “ability to protect the company from its promoters is limited”.
The firm has also criticised the promoters’ low engagement in board meetings, saying this is less than acceptable and a cause for concern. The promoters’ board meeting attendance was less than 40 per cent in 2015-16, according to IiAS. This improved only slightly to 63 per cent in 2017-18 as differences between the two factions began to simmer, despite the Kotak committee recommending a harsh criterion for reappointment of absentee directors. This shows the promoters controlled the business and the board had a limited role, IiAS says.
It points out that the related-party transaction issues raised by promoter Rakesh Gangwal might not be material, but stakeholders will be wary of giving IndiGo their money just yet — they will want to know who wins this battle before increasing their exposure. So, new aircraft purchases, engine replacements and any other material expansion might get delayed. Investors might not be as concerned with related-party transactions as with potential delays in value creation.
18/07/19 Surajeet Das Gupta/Business Standard
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The firm has also criticised the promoters’ low engagement in board meetings, saying this is less than acceptable and a cause for concern. The promoters’ board meeting attendance was less than 40 per cent in 2015-16, according to IiAS. This improved only slightly to 63 per cent in 2017-18 as differences between the two factions began to simmer, despite the Kotak committee recommending a harsh criterion for reappointment of absentee directors. This shows the promoters controlled the business and the board had a limited role, IiAS says.
It points out that the related-party transaction issues raised by promoter Rakesh Gangwal might not be material, but stakeholders will be wary of giving IndiGo their money just yet — they will want to know who wins this battle before increasing their exposure. So, new aircraft purchases, engine replacements and any other material expansion might get delayed. Investors might not be as concerned with related-party transactions as with potential delays in value creation.
18/07/19 Surajeet Das Gupta/Business Standard
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