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Explained: Why are IndiGo promoters at loggerheads

The promoters, also the founders of the airline -- Rahul Bhatia and Rakesh Gangwal -- have appointed separate law firms to settle the dispute between them.

Written by Pranav Mukul , Edited by Explained Desk |
May 16, 2019 4:58:59 pm
Explained: Why are IndiGo promoters at loggerheads Sources have indicated that the main point of contention between the two founders is over the strategy for the airline’s growth.

Promoters of India’s largest and most profitable airline IndiGo are reportedly at loggerheads because of differences in opinions about the airline’s future strategies and management control. The promoters, also the founders of the airline — Rahul Bhatia and Rakesh Gangwal — have appointed separate law firms to settle the dispute between them.

History of the promoters

Rahul Bhatia and Rakesh Gangwal founded IndiGo as a low-cost airline back in 2006. Bhatia worked in the hospitality sector while Gangwal, a US citizen was a senior executive at United Airlines. Both the promoters held nearly 99 per cent stake in the airline prior to its listing in 2013 and as of March 31, Bhatia held 38 per cent stake while Gangwal owned 37 per cent share in Interglobe Aviation, the parent company of IndiGo. While both Bhatia and Gangwal are directors of the company, Bhatia was also the airline’s interim chief executive till January taking over after Aditya Ghosh’s exit last year.

What is the conflict about?

Sources have indicated that the main point of contention between the two founders is over the strategy for the airline’s growth. While Gangwal is said to favour a more aggressive growth path, Bhatia is understood to be for a slow and steady approach. Further, it is learnt that the two have been in a tussle over appointments of senior management personnel at the airline.

What could be the outcome of this tussle?

As a knee-jerk reaction to the development, the Street beat down Interglobe Aviation’s stock, which, at 1.32pm traded 6.74 per cent lower than its previous close at Rs 1,500.15 on the BSE. Industry watchers have indicated that the fact that both have delegated their lawyers to work the dispute out shows that the conflict is unlikely to affect the airline or its operations in the immediate term. However, the longer term flight path of IndiGo will depend on which of the promoters gets an upper hand

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