IndiGo EGM: Shareholders Reject Rakesh Gangwal’s Proposal To Amend Articles Of Association

A majority of InterGlobe Aviation Ltd.’s shareholders voted against a proposal to amend the articles of association of the company that would’ve allowed the promoters to buy or sell stake in India’s largest airline.

51.44 percent of the participating shareholders voted against the special resolution at today’s extraordinary general meeting, according to a stock exchange filing by the parent company of IndiGo airlines. The remaining 48.6 percent were in favour. A special resolution requires support from at least 75 percent of the votes cast to go through.

Close to 94 percent of the total outstanding shares were voted on. Of the total 28.80 crore promoter-owned shares voted, 14.22 crore shares or 49.38 percent voted in favour of the resolution and 14.58 crore shares or 50.61 percent voted against the resolution. Obviously Rakesh Gangwal, who owns 14.09 crore shares and was the one to requisition the EGM, voted in favour of the proposal with support from another promoter shareholder. The Rahul Bhatia group owns 14.58 crore shares indicating that he didn’t support the resolution.

Curiously, the 49:51 split characterised the public voting pattern as well. Public institutions voted 48.34 percent in favour and 51.66 percent against. Public non-institutional shareholders voted 48.56:51.44.

Gangwal did not attend the EGM. Bhatia was present, along with his wife and director Rohini Bhatia, board chairman M Damodaran and Ronojoy Dutta, whole-time director and chief executive officer, among others.

The Back Story

Rakesh Gangwal, co-founder of InterGlobe Aviation, had called the IndiGo EGM to scrap provisions that require the airline’s controlling shareholders to seek permission from each other for buying or selling shares. These were part of the shareholder agreement that Gangwal and co-founder Rahul Bhatia had signed in April 2015, restricting transfer of shares or acquisition of a new stake. The restrictions, however, lapsed on Nov. 10, 2019— four years after the airline’s initial public offering. Hence Gangwal was seeking a corresponding change in the articles as well but failed to get the support of his co-founder Rahul Bhatia.

The two promoters have been sparring after Gangwal alleged questionable related-party transactions and raised concerns over the composition of the board and other corporate governance issues. Since May last year, when the spat went public, IndiGo’s shares have fallen more than 5 percent despite the company’s strong financial performance.

Also Read: Two Key Things That Keep IndiGo Ahead Of SpiceJet

The EGM was expected to bring an end to the ongoing IndiGo promoter dispute and remove a major overhang on the stock price of India’s largest airline operator.

Had the special resolution passed, there was a possibility for Gangwal selling either full or part of his stake. He owns 36.6 percent worth Rs 21,000 crore in the company, while Bhatia holds nearly 38 percent.

Qatar Airways, U.S.-based Delta Airlines and co-founder Bhatia were the top contenders to buy the Gangwal Group’s stake in the company.

Shares of InterGlobe Aviation closed 0.62 percent higher compared with a 0.57 rise in the benchmark BSE Sensex today. The stock has fallen over 22 percent from its peak on Sept. 30, 2019.