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Today's IndiGo AGM may be a 'non-event' but still a milestone

Gangwal is away in the US where he is based and is not attending the AGM

August 28, 2019 / 04:36 PM IST

All the build-up since early July when co-founder Rakesh Gangwal wrote to SEBI alleging corporate governance issue at IndiGo has made the August 27 AGM a watch-out-for event for the domestic aviation industry.

But, with Gangwal calling a truce with fellow co-founder Rahul Bhatia, it has perhaps made the AGM a non-event. In fact, Gangwal is away in the US where he is based and is not attending the AGM.

At the same time, the annual general body meeting is still an important milestone for the country's largest airline.

The AGM will see shareholders’ vote on important amendments to IndiGo's Articles of Association that will change the board composition. Approval will also be sought for the inclusion of a woman independent director, a first for the airline.

At the same time, the issue of related party transactions - which was among the most contentious issues between the two founders - may not even be on the agenda.


Board expansion

After Gangwal first alleged that Bhatia's InterGlobe Enterprises (IGE) enjoyed unusual powers when it came to the appointment of directors and senior leadership, it seemed that the two had agreed to make changes.

The airline's board meeting in July was followed by announcements to include a woman as an independent director, and the board itself was to be expanded to 10 directors from the present six.

But, Gangwal later came back, saying that the proposal had a “large loophole”. The issues was this: in the expanded board, the IGE would have an upper hand whenever an independent director was not present. This could enable them to pass any change.

Gangwal said he would not sign on the changes unless the loophole was plugged. Gangwal's support was needed as any change in the Articles of Association needed the nod of 75 percent of shareholders. And, the industry veteran alone has nearly 37 percent of the shares of IndiGo.

A compromise was reached last week. The IGE has assured in writing that it won't press for any policy change unless the complete board is present. Gangwal has also ceded a little ground and accepted that any change brought out by a government order would not need the Board's full strength.

On the related party transactions, the company's audit committee now needs to get the board's inputs for any transaction that is above Rs 2 crore. Gangwal earlier alleged that Bhatia's IGE had benefitted unduly from these transactions. IGE refuted the allegations.

The AGM will also vote on the appointment of chairman M Damodaran as an independent director.

The copy has been updated with additional details on related party transactions
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.

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