Thursday, December 30, 2021

Is this the end of IndiGo promoters’ feud?

InterGlobe Aviation Ltd, which operates India’s largest low-cost carrier (LCC) IndiGo, has faced turbulence for over two years due to the feud between the promoters but the upcoming shareholders’ meet on December 30 could potentially make way for a smooth flight.

IndiGo’s two largest shareholders, Rahul Bhatia and Rakesh Gangwal, who collectively hold 74.44 percent of the paid-up equity share capital have called an extraordinary general meeting (EGM) on Thursday to amend its Articles of Association (AoA) and remove restrictions on the transfer of promoter shares. If the resolution is accepted, it would end the dispute between the owners.

The resolution is expected to pass smoothly, given that both the promoters have jointly called the meeting. Once passed, it would allow either side to sell or transfer shares to a third party, without giving each other notice.

While neither party has publicly said that they intend to sell their shares in IndiGo, the resolution would allow both promoters a chance to exit the airline. There are already speculations that Gangwal may dilute his stake. 

The spat between Bhatia and Gangwal started when the latter accused Bhatia of indulging in “questionable” related-party transactions between InterGlobe Aviation and Bhatia Group entities, more than two years ago.

Since then, the two are believed to be in disagreement over strategies and ambitions pertaining to IndiGo as well.

Multiple market experts say Gangwal taking a backseat in the operations of IndiGo in the last few years signals he may be looking to dilute his stake in the airline.

Before the feud, Gangwal would often be at the forefront in making most big operational decisions at the airline, such as aircraft orders, leasing and maintenance contracts.

It is also learnt that the two have been in a tussle over appointments of senior management personnel at the airline.

If the feud continues, it would impact the management’s decision-making abilities-- that too in a very dynamic environment the airline is operating in. This won’t augur well for the various stakeholders of the company.

The resurrection of Air India, Jet Airways 2.0 and the launch of Rakesh Jhunjhunwala-backed Akasa Air will pose a threat to IndiGo and has already forced the low-cost carrier to make some changes. IndiGo cannot afford to have its promoters at loggerheads anymore.

“The next year will see IndiGo performing a balancing act as it tries to maintain its dominance in the domestic market. Having one less headache (promoter feud) will definitely be a bonus,” an official from a domestic aviation consultancy said.

Senior aviation expert Ameya Joshi adds: “The imminent entry of the new airlines has already led to a battle for talent in the industry, which has been reeling under job losses and salary cuts.”

The entry of the new player in the aviation space will also affect landing slots, flight timings and ticket prices.

30/12/21 Yaruqhullah Khan/Moneycontrol

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