Shares of InterGlobe Aviation Ltd, the operator of India’s largest airline IndiGo, tumbled over 19% in early trade on Wednesday after one of its co-founders, Rakesh Gangwal, raised corporate governance issues with the Securities and Exchange Board of India (Sebi).
At 10.13 am, IndiGo shares were trading at Rs 1,371, down 12.5%, on BSE after hitting an intra-day low of Rs 1,264.85.
Gangwal, who owns 37% in IndiGo compared with the rival co-founder Rahul Bhatia’s 38%, wrote a letter to Sebi complaining about the corporate governance practices at the airline. Gangwal accused Bhatia of “building an ecosystem of other companies that would enter into dozens of related party transactions with IndiGo”.
The letter also highlighted that Bhatia had “unusual controlling rights over IndiGo” and that these rights and a lack of “diversity and paucity of independent directors may very well be at the root of why governance matters have taken such a back seat at IndiGo”.
Gangwal in his letter warned, “Beyond just questionable RPTs (related party transactions), various fundamental governance norms and laws are not being adhered to and this is inevitably going to lead to unfortunate outcomes, unless effective measures are taken today.”
Notably, the letter has also been sent to Prime Minister Narendra Modi, finance minister Nirmala Sitharaman, commerce minister Piyush Goyal, aviation minister Hardeep Puri and aviation regulator Arun Kumar.
In a filing to the stock exchanges, InterGlobe Aviation said its board of directors has received a letter from Gangwal. “Sebi has in the meantime asked the company to give its response to this letter by 19 July 2019, with which the company will comply,” the filing said.
Meanwhile, Rahul Bhatia in his response wrote to the board alleging that the genesis of Gangwal’s angst was his “hurt ego” and refusal of IGE Group to entertain his “unreasonable demands”.
Bhatia alleged that Gangwal had a hidden agenda and was not willing to discuss the related-party transaction issue in isolation.
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