IndiGo promoter dispute: Gangwal limited financial risks, says Bhatia camp

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IndiGo promoter Rahul Bhatia has hit back at co-promoter Rakesh Gangwal’s demand for more control, saying that he has played a more significant role and undertaken financial risks while Gangwal limited his own.


This arrangement, Bhatia’s InterGlobe Enterprises (IGE) says, is the primary reason why it has more controlling rights in the company.


The support included personal guarantees from Bhatia and his father, Kapil Bhatia, of more than Rs 1,100 crore during the initial years of the company.


Bhatia has said its businesses had supported the airline in its fledgling years through its pan Indian sales and distribution network, call centres and IT services, and office space, some of which was also provided on a complimentary basis.


Bhatia and Gangwal founded IndiGo in 2005 and it now commands almost half of India’s domestic market. Each holds around 37 per cent in the company. “Right from the inception, the arrangement between the IGE Group and Mr Gangwal was transparent.


While each was to hold about equal ownership, the IGE Group was to take the financial risk. He had been a professional manager his entire life whilst the IGE Group had entrepreneurial DNA with a different view of and approach to risk,” IGE said.

Rahul Bhatia
IGE said the company’s presence in aviation helped nurture the airline in its nascent years. The two promoters fell out after Gangwal wrote to the Securities and Exchange Board of India (Sebi), alleging lack of corporate governance in the company.


Gangwal alleged Bhatia, who holds controlling power in the company, used it to enter into questionable related-party transactions between IGE and IndiGo, to help his group companies.


However, IGE said in a press statement on Sunday until IndiGo had a strong balance sheet to support itself seven years after it was set up, it was left to IGE “to fend for IndiGo”.

Rakesh Gangwal
At the peak of its turbulence, Bhatia and his father “extended personal loans to IndiGo and personal guarantees to the banks for diverse financing needs of IndiGo such as pre-delivery payments, aircraft acquisition, and working capital requirements”, totalling Rs 1,100 crore, which was about 75 times the Rs 15 crore equity invested by Gangwal, who wanted limited his exposure to risk, the statement adds.


IGE said “Mr. Gangwal was missing in action” during this difficult phase and attempted to de-risk himself and pushed for the business to be sold.


“Is there sanctity in agreements entered into by business people- freely and at their own will,” IGE asked Gangwal, who has alleged that the airline is “veering off from the core principles and values” of corporate governance.


Gangwal in an interview with Business Standard last week said he had asked Sebi to amend a clause in the company’s Articles of Association, which bind him to vote for IGE’s selection of key executives including chairman, CEO and president.

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