Rakesh Gangwal Skips IndiGo AGM, Management Allays Shareholders’ Fears

Rakesh Gangwal, co-founder of InterGlobe Aviation Ltd., skipped the company’s annual general meeting even as the management tried to reassure shareholders that its two feuding promoters are working to resolve corporate governance issues.

The promoters have been speaking to each other and there will be a solution over time, M Damodaran, chairman of the board, said at the IndiGo AGM.

Gangwal had, in a July letter to the aviation regulator, alleged questionable transactions between co-founder Rahul Bhatia’s privately held Interglobe Enterprises Ltd. and the airline, and cited violations of governance regulations and the company’s code of conduct. Bhatia, however, rejected that, saying Gangwal’s real agenda was “to dilute and diminish the controlling rights of the IGE Group”.

Shares of InterGlobe Aviation had tumbled due to the IndiGo promoter dispute but recovered as reports of a possible truce started doing the rounds.

Bhatia, speaking at the AGM, said IndiGo will soon be a company not dependent on its two promoters. “It’s important to understand that organisations have to outgrow the parents, and to that extent, I believe that the company is rapidly moving to a point where it can stand on its own two feet and live its own life.”

Chief Executive Officer Ronojoy Dutta said that the airline had not found a single related-party transaction that wasn’t at an arm’s length or not in the interest of the company. All of them, he said, were unanimously approved by the board’s audit committee.

Minority shareholders attending the IndiGo AGM were not convinced but remained hopeful. And Gangwal’s absence irked almost everyone BloombergQuint spoke with.

Shareholders Worried But Hopeful

“The dispute needs to be solved between the promoters amicably so that the company can grow. While Gangwal has now agreed to most of the issues, but he himself has not attended the meeting, which is hurting us,” said Anil Parekh. “Whatever the issue is he should have come before the shareholders and put his perspective.”

Abhishek, who only gave his first name, said, “The chairman did not discuss about the conflict between the promoters, and even though we asked them for a detailed explanation about the issue, some clarification, it wasn't given to us. We are not confident that the issue is resolved and are really worried as investors. Gangwal shouldn't have avoided the meeting.”

Nandkishor Kashikar, another minority shareholder, said the company is doing well but they have suffered as the share price fell because of the IndiGo promoter dispute. “The reputation of the company is at stake, and we hope this settles soon,” he said.

Hiranand Kotwani came to the meeting only because of the dispute, as the troubles of Jet Airways (India) Ltd. has hurt confidence. But he sounded optimistic. "If there is a will, there is a way. Ego is an issue but am convinced they will sort it out,” Kotwani told BloombergQuint. “One of the seniormost persons on the board, M Damodaran, is a sincere and competent person. He can at least try his best.”

IndiGo CEO Dutta also spoke on other issues at the AGM. Here's what he said on:

Whistleblower Policy

IndiGo has a robust whistleblower policy and the chairman of audit committee has not received a single such complaint.

Operational Performance

Passenger traffic in India will be soft in the ongoing quarter, a seasonally sensitive period. It will pick up in the third quarter ending December and the airline expects the full fiscal to be good. IndiGo has just started the process of value creation and has a long way to go.

Expansion

Airline traffic tends to grow at twice the rate of the GDP growth. “We expect that half our capacity growth will go international and the other half will be domestic. We know we can grow 30 percent a year for the next few years,” Dutta said. IndiGo is focusing on Vietnam and Middle East, which are not only growing fast but are very profitable, he said. “That’s the best formula for us when we expand on the back of higher margins. There is a lot of room for growth and we need to do it aggressively.”

Induction Of ATR For Short-Haul Flights

The costs of operating an ATR versus an Airbus is very different and while it may be more costly to operate ATR aircraft, they have a higher revenue and in short-haul operations gets you to places where the Airbus cannot operate, Dutta said.

“Compared to competition, the Q400 is way too expensive than the ATR that we have bought. The UDAN scheme (connectivity with smaller cities) and the ATR is a very good combination to get into very small cities and we are very supportive of the scheme.”

Dividend Policy

“There is a carrying cost for holding a stock for foreign investors, there is currency depreciation and we want to make up for that,” Dutta said. “Keeping all these factors in mind, IndiGo intends to give a dividend every year.”