Bhatia vs Gangwal: This time, the focus may be on IndiGo's shareholding

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26 Aug, 2025 12:21

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The opening of a new front in the tiff between IndiGo co-founders - Rahul Bhatia and Rakesh Gangwal - puts a larger question on the future shareholding of the country's largest airline.

This is especially apt since the issues between the two friends-turned-business partners-turned adversaries seemed to have been settled, only to be brought up again through the unexpected announcement by the airline late night on September 1.

The announcement said that Bhatia and his InterGlobe Enterprises (IGE) have submitted a Request for Arbitration at the London Court of International Arbitration against Gangwal and his RG Group.

"This dispute relates to claims of the IGE Group against the RG Group regarding, inter-alia, compliance with the Shareholders Agreement and the articles of association of the company and damages," IndiGo said in the statement.

The development came even after IndiGo Chairman and former SEBI chief M Damodaran stated in early September that the two founders had come to a truce and were working in the direction of peace.

Now that the truce has been broken, yet again, it looks like the two co-founders have come to a point of no return.

"You come to arbitration when a stage has been reached where they can't resolve an issue. So you bring in a third party," said Tarun Bhatia, Managing Director and Head of South Asia in the Business Intelligence and Investigations practice of Kroll, a division of global valuation and corporate finance advisor of Duff & Phelps.

"From the longevity point of view, it doesn't look like both promoters can continue at the company. There could be a change in shareholding," added Bhatia.

The truce

The tiff between the co-founders became public in July after Gangwal had raised issues of corporate governance in IndiGo in his mail to the Securities and Exchange Board of India (SEBI).

Some of his main grouses were:

- Bhatia's IGE's group enjoyed undue power, compared to Gangwal's RG Group, despite the nearly similar shareholding of the two

- Related party transactions between IndiGo and IGE

- Absence of independent woman director on the board, despite regulations

The board and the company eventually acted up on these grievances. While the AGM of the company cleared the amendment of the AoA, the board was expanded from six to 10 directors, and Pallavi Shardul Shroff was appointed as the airline's first woman independent director.

Even as these issues were put to rest, at least seemingly, Gangwal was said to have reiterated that he would continue to look into corporate governance issues at the airline.

The new front

London and Singapore are the favoured destinations when it comes to international arbitration.

"Arbitration means that resolution can be handled professionally, and doesn't need to be played out on the front pages. Arbitration in London means it's away from the domestic market, fewer lens and the proximity is diluted. The overall process will be transparent," says Bhatia.

It may well suit the two promoters, who are extremely tight-lipped.

Neither of them responded to queries from Moneycontrol. Representatives of IGE declined to comment.

It is clear that now it is Bhatia who has raised the alarm.

"It is the Rahul Bhatia group that has gone to arbitration. They may want to change the Articles of Association, or AoA, changed," said Shriram Subramanian, the founder and MD, Ingovern Research Services, a proxy advisory firm.

"The Rahul Bhatia group may want changes to it given that for many decisions they are bound by the AoA to seek Gangwal's approval," added Subramanian.

A resolution through arbitration will be important to put an end to the matter, which may otherwise start impacting other stakeholders. "Right now it's an arbitration over commercial agreement. If this doesn't get resolved, can become a dispute," says Bhatia.

Eventually, it may come to this: can Rahul Bhatia and Rakesh Gangwal exist together?