IndiGo Founders Disagreement Causes Share Price Plummet


A disagreement between the two founders of IndiGo has bubbled over into the public domain. Founder Rakesh Gangwal is accusing co-founder Rahul Bhatia of serious corporate governance issues, causing shares in the carrier to plummet by 19%.

IndiGo share prices have taken a hit as a result of the public spat. Photo: Airbus

An ongoing feud between the promoters of India’s largest airline, IndiGo, has erupted into the public space, causing shares in the carrier to plummet. In the latest letter, Rakesh Gangwal made some serious allegations regarding lapses in corporate governance at the company. In the letter, printed in full at Business Today, Gangwal said,

“…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.”

Gangwal has appealed to the Securities and Exchange Board of India (SEBI) to intervene in the situation, indicating that the boardroom spat is escalating. The disagreement began in May when the co-founders couldn’t resolve their differences of opinion regarding the airline’s expansion.

What are the allegations?

Rakesh Gangwal has submitted a letter to SEBI laying out a number of allegations against Rahul Bhatia’s IGE Group. SEBI, being a stock market regulator, has the power to protect the investment rights of shareholders in listed companies.

SEBI could step in. Image: SEBI

The list of allegations from Gangwal is lengthy. However, they include issues such as:

  • Violations of regulations and the code of conduct for directors
  • The board blocking a requested shareholders meeting
  • Decisions being made without protocols and laws being followed
  • Pushing through a resolution allowing IGE to screen candidates for senior positions
  • Failing to appoint an independent female director, despite being instructed to in May 2018

Gangwal alleges that many of the self-appointed rights that Bhatia has given himself are not in accordance with SEBI regulations. He has called on SEBI to review the situation and, if necessary, to step in and make changes to the controlling rights available to the IGE group.

Gangwal goes on to say,

“I have vigorously attempted for almost a year to persuade the Company to shore up its governance standards, and all my attempts have been thwarted by the IGE Group. The Company’s and certain Board members constant platitudes that they are “working on these issues … going forward we will be more mindful … we have been addressing these issues” have become just words.”

Promises have ‘become just words’. Photo: Simple Flying

According to the Financial Times, Bhatia has rebuffed the letter, calling Gangawal’s allegations “false, frivolous, and misleading”. He also said that Mr. Gangwal was suffering from a “hurt ego” and was making “figleaf statements” in an attempt to conceal his desire to win greater control of the company.

Mr. Gangwal’s RG Group holds a 37% stake in IndiGo, and Bhatia’s IGE has 38%.

How is this affecting IndiGo?

In terms of flights and schedules, there is no immediate effect of the current falling out, so passengers on IndiGo can be confident they will be looked after.

In his letter, Gangwal said,

“To allay any concerns among various governmental authorities, our customers, our employees, and our shareholders that the operations of IndiGo are not impacted or disrupted…”

However, Flight Global reports that the news of the spat has pushed shares in IndiGo down by 19%, which is never good news for an airline.

The spat between the founders of IndiGo comes as the airline attempts to expand internationally in the wake of the collapse of Jet Airways.