IGE questions Gangwal's contribution is building India's largest airline
Continuing on its rebuttal of corporate governance allegations by IndiGo co-founder Rakesh Gangwal, InterGlobe Enterprises (IGE) on July 14 issued another statement that questioned his contribution in building India's largest airline.
IGE, which is owned by Gangwal's colleague and also IndiGo co-founder Rahul Bhatia, alleged that Gangwal was 'missing in action' during turbulent times, "and there were stages where he wanted to de-risk and pushed for the business to be sold."
Gangwal had earlier alleged that Bhatia's IGE had benefitted through related party transactions with IndiGo, whose corporate governance was comparable to a 'paan ki dukaan.'
But on July 14, IGE contended, that it "had established itself as the premier service provider in the aviation industry," much before the airline was founded in 2005.
IGE's InterGlobe Aviation is the holding company of IndiGo.
IGE said that Gangwal "has much to answer," after stating that he made a mistake in agreeing to the rights of the IGE Group and that “times, circumstances and behaviour of promoters” had changed since 2015.
"Do business ethics and morals permit a contracting party to walk away from its obligations at its convenience after it has enjoyed the benefits under an agreement and pretend to be a victim?" asked IGE in its statement.
On July 12, IGE had said that Gangwal's allegations of lack of corporate governance was 'much ado about nothing.' It added that the "Paan ki dukaan,"—as described by Gangwal —" has apparently done well and continues to do well."
The latest salvo continues in the same vein. The IGE statement reiterates that it was the Group, which had an 'entrepreneurial DNA' that took much more risks and invested higher than Gangwal, who "had been a professional manager.'
Bhatia's company said that his colleague's risk was capped at Rs 15 crore (Gangwal's equity investment in IndiGo), whereas his family's exposure had gone up to Rs 1,100 crore by 2010.
This included the money invested by the Bhatia family to meet conditions put by Airbus on the order for aircraft.
"Following Airbus’ requirement that IGE and Gangwal give a joint undertaking of support to IndiGo—the then newly formed and unknown entity—by a letter in November 2005, IGE and Gangwal undertook to invest in IndiGo an amount of “not less than” $50 million (which then converted to about Rs 200 crore).
"As Gangwal was not going to take any further financial risk or obligation, IGE singly (though the undertaking to Airbus was a joint) took the obligation to further invest up to Rs 110 crore in IndiGo so that taken together with the then existing investment of Rs 99 crore, the conditions placed by Airbus could be met," said the statement.
Stressing on the role played by IGE in IndiGo's journey to its dominant status, it said:"As IndiGo started operations, it was the IGE Group’s created eco-system and infrastructure that provided critical support and nurturing to IndiGo such as pan India sales and distribution network, call centre and IT services, and office space. These facilities and support services were provided at cost and many a time on a complimentary basis."The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .