41% Of Institutional Votes Cast Were Against IndiGo’s Move To Expand Board
Even as InterGlobe Aviation Ltd. won shareholder support to expand its board after two feuding co-founders called truce, the special resolution faced the biggest opposition from institutional investors.
Nearly eight percent of the shareholders among those who voted rejected the move to alter Articles of Association, according to exchange filings. These were largely institutions. Of the 84 percent of such large public shareholders who voted, 41 percent rejected the move. Institutions own nearly 21 percent stake in InterGlobe Aviation.
The special resolution, put to vote at the 16th annual general meeting, only sought to expand the board size from six to 10 and it’s unclear why institutional shareholders would oppose it. BloombergQuint has emailed queries to SBI Magnum Equity Fund, Kotak Mahindra Bank Ltd. and ICICI Prudential Life Insurance Company Ltd., three of the largest institutional shareholders in InterGlobe Aviation.
Amit Tandon, founder and managing director, Institutional Investor Advisory Services, said the board expansion doesn’t address the concerns. “While we support the expansion in board size, we believe that only the induction of more independent directors will strengthen the role of the board and reduce the overarching control of promoters.”
Promoters’ right to board seats and their nomination rights are not linked to shareholding and will continue even if their stake falls below 50 percent, Tandon said, adding that Bhatia’s IGE group continues to retain the right to nominate the chairman, the CEO & MD, and the president. “We do not support board permanency—both promoter factions have embedded rights to appoint a non-executive director that will not retire by rotation.”
The special resolution, however, sailed through with the support of 92.3 percent of those who voted, higher than the regulatory threshold of 75 percent. Promoters and retail investors backed it.
Eight other ordinary resolutions were also passed with the support of nearly all the shareholders who voted.
Rakesh Gangwal, who earlier said the changes would give more powers to InterGlobe Aviation Enterprises Group controlled by fellow co-founder Rahul Bhatia, voted in favour of the special resolution even though he skipped the annual general meeting. That came after the airline agreed to change its related-party policy following his accusations of questionable transactions between Bhatia’s firm and the airline.
Apart from increasing the board strength to 10, the change in the Articles of Association provides for up to four independent directors. That follows appointment of two additional non-independent directors by Bhatia’s IGE Group.
Prior to it, InterGlobe Aviation’s board had six directors: Chairman M Damodaran, Gangwal, Bhatia, his wife Rohini Bhatia, Anupam Khanna and Anil Parashar. Of these, Damodaran and Khanna were non-executive independent directors.
At the AGM, the carrier’s management tried to reassure shareholders at the AGM that the two promoters are working to resolve corporate governance issues. The promoters have been speaking to each other and there will be a solution over time, Damodaran said.