Gangwal also said he does not want to take over InterGlobe Aviation, the company that runs IndiGo. He also clarified that he would not sell his stake in the company, and that he will no longer be a part of the airline’s operations, and will focus on corporate governance issues instead.
Rakesh Gangwal, Co-Promoter of IndiGo, is looking to meet the Prime Minister to request him to help resolve the alleged corporate governance issues plaguing the airline.
In an interview with CNBCTV18.com, Gangwal said, “I am trying to see if the Prime Minister would ask the government to intervene and fix the issues that I have raised at IndiGo because it is a security and economic matter and the airline is part of the national fabric.”
The differences are specifically connected to the related party transactions (RPT) between IndiGo, and other units of InterGlobe Enterprises (IGE), the holding company of Rahul Bhatia's business empire.
Gangwal had earlier aired his grievances in a letter to the capital markets regulator SEBI on July 8. It stated that IndiGo’s co-promoter, Rahul Bhatia, has "unusual rights" over IndiGo due to the shareholders’ agreement between them. These controlling rights give IGE Group, a minority shareholder, significant influence over the decisions of IndiGo.
“I hadn't contemplated that over the years, Mr. Bhatia would start building an ecosystem of other companies that would enter into dozens of related party transactions with IndiGo. We are not against RPTs as long as proper checks and balances exist and such RPTs are in the best interest of the company,” stated the letter
Gangwal also told the media outlet that he does not want to take over InterGlobe Aviation, the company that runs IndiGo.
“But I believe that it is important that no one group or individual or promoter should have such significant control over a critical infrastructure as the airline,” he said. The PM’s mediation, he believes, will send out an important message to other 'errant' businesses that India has changed and such governance lapses will no longer be tolerated, particularly in case of such critically important companies.
He also clarified that he would not sell his stake in the company and that he will no longer be a part of the airline’s operations, and will focus on corporate governance issues instead.
Gangwal also told the publication that given the size and relevance of the airline, independent directors should comprise more than the current one-third strength.
As a solution to the related party transactions (RPT), the publication noted that Gangwal had proposed the following measures:
-Competitive bids to be instated for RPTs above a certain amount. They must come from an arm's length from the company and must be vetted by a qualified firm.
-The firm then reviews the bids and presents its opinion to an audit committee, which will have the final authority to decide on the bids.
Gangwal said that these solutions were rejected by IPE.
In a letter written by Rahul Bhatia on June 12, he said that Gangwal’s ego was hurt as the company proceeded to make alternate arrangements for original equipment manufacturers (OEMs).
He also alleged that the Rahul Gangwal group wanted to relieve itself from its obligations under the shareholders' agreement and articles of association (AoA) as Gangwal is scared of liability in a highly regulated sector. and that the real agenda of the RG group is to dilute, diminish controlling rights of the IGE group.
Bhatia also alleged that Gangwal did not raise for 13 years any objections against any RPTs, and had also happily agreed to fundamental proposition that IGE group will have control, as Gangwal did not mind that IGE group was taking the entire economic risk, and that year after year, he signed and approved the annual account statements without raising any objections.Read the full report by CNBCTV18.com here