The two promoters of India’s largest airline, IndiGo, have reached a truce brokered by the company’s chairman. The promoters, Rahul Bhatia and Rakesh Gangwal, had been at loggerheads with the latter accusing the former of carrying out questionable transactions and not adhering to company governance norms.
Bhatia and his affiliates (IGE Group) hold about a 38% stake in the airline, while Gangwal and his affiliates have about a 37% stake and the rest is held by the public. Bhatia and his group enjoy greater powers, which include appointing the chief executive officer and president of the company.
IndiGo Chairman M. Damodaran, who was earlier chairman of the stock market regulator, Securities and Exchange Board of India, is reported to have played a key role in brokering peace between the promoters.
As per the new compromise formula, the strength of the board has been increased to 10 from six, but the Bhatia camp will continue to have the upper hand.
Bhatia’s IGE group will nominate five board members, including chief executive officer (CEO). In addition, there will be four independent directors. As for Gangwal, he will continue to be the only representative from his side, and will not nominate any director.
In order to ensure the independence of directors, a headhunting firm will be appointed by the board to search for directors.
However, as demanded by Gangwal, the company has made changes in its related-party transactions. A request for proposals will be floated for all such transactions and a competitive bidding process will be followed for those over 20 million rupees. External consultants will be hired to deal with technical issues and transactions, Economic Times reports, quoting unnamed sources.
The new related-party transactions policy will be implemented through an amendment to the Articles of Association and any change will require the unanimous approval of all the independent directors, the daily added.
The related party transactions occur in the areas of real estate leased to Inter-Globe Aviation (the company that operates IndiGo), simulator training facilities, general sales agents and accommodation for crew.