JOIN USAfter Rakesh Gangwal's exit, what's next for Indigo?
IndiGo's co-promoter Rakesh Gangwal on February 18 resigned from the board of directors of parent company InterGlobe Aviation. In a resignation letter, Gangwal said he plans to gradually reduce his stake in the company over the next five-plus years to allow himself to benefit from some of the upside. But what led to this and what does this mean for the future of the carrier? Let us take a look:
Once the chief executive officer at US Airways, Gangwal teamed up with Bhatia — a former airline sales agent — to create IndiGo in 2005. The carrier quickly outpaced rivals and grabbed a dominant market share soon after launching, making both founders billionaires. IndiGo, the country’s largest airline which controls about 55 per cent of the market, is one of the few Indian carriers with enough firepower to aggressively expand its low-cost business model.
What does Gangwal's exit mean for the carrier?
Gangwal's move removes the overhang over the airline, which posted a surprise swing to profit earlier this month, as people started flying again after two years of the Covid-19 pandemic that gutted global travel. It also signals a truce in what was a years-long feud between Gangwal and his IndiGo’s fellow co-founder Rahul Bhatia.
Bhatia recently took on a newly-created executive position of managing director at the company. Shareholders voted to lift restrictions in December on the transfer of shares — a rule tweak that paved way for Gangwal to sell his stake. Bhatia in his executive role will be focusing on expanding the airline in India and overseas. He will oversee all aspects of the airline, besides actively leading the management team, Chairman Meleveetil Damodaran said in the statement earlier this month.
Gangwal told the company board that he now wants to take some of the winnings off the table as he sells his stake — Indigo shares have climbed more than 155 per cent in the last five years outpacing the benchmark S&P BSE Sensex. He is, however, keeping his options open, saying he may consider “participating again as a board member” in the future. On his stake-paring plans to benefit from Indigo’s stock rally, he said: “Like any plan, future events may impact my current thinking.”
What was the dispute that led to him resigning?
The feud between the two promoters -- Bhatia and Gangwal -- came into the public domain after Gangwal had written to market regulator Sebi in July 2019 and sought its intervention to address the alleged corporate governance lapses at the company, charges that have been rejected by the Bhatia group. The bitter public spat began over a 2015 shareholder agreement that Gangwal said gave Bhatia greater management control despite the similar size of their stakes.
In 2019, both the promoters had moved to the London Court of International Arbitration to resolve their disputes. The court had passed its order on September 23 last year, following which the aforementioned extraordinary general meeting was called to amend the company's AoA. Gangwal and his related entities own around a 37 per cent stake in this company, whereas Bhatia and his related entities own around 38 per cent in InterGlobe Aviation.
(With Bloomberg/agency inputs)