IndiGo co-founder Rakesh Gangwal on Friday resigned from the board of parent company InterGlobe Aviation, stating that he will gradually reduce his equity stake in the budget airline over the next five years.
Gangwal and his entities related to him own around 37 per cent stake in the company. The other co-founder, Rahul Bhatia, and his related entities own around 38 per cent in InterGlobe.
“I have been a long-term shareholder in the company for more than 15 years and its only natural to someday think about diversifying ones holdings,” Gangwal said in his letter to the board. “Accordingly, my current intention is to slowly reduce my equity stake in the company over the next five plus years.”
At an extraordinary general meeting on December 30, IndiGo shareholders had approved a special resolution to remove a clause from the company’s articles of association, which gave its two promoters the power of right of first refusal when one of them wanted to sell his shares.
The passage of the resolution paved the way for resolution of a dispute that has been going on between Gangwal and Bhatia since 2019. In his letter on Friday, Gangwal said he continues to be a big believer in the long-term prospects of IndiGo, and more so now with the industry consolidation underway.
“Under this backdrop and in the long-term, Indian aviation should prosper, as in various other parts of the world,” he said.
While new investors should benefit from the potential growth in the company’s share price, a gradual reduction of Gangwal’s stake will also allow him to benefit from some of the upside, he mentioned.
“Like any plan, future events may impact my current thinking,” he said. However, he said he is concerned about the optics of reducing his equity stake even though such transactions can only be undertaken when he does not have any unpublished price sensitive information (UPS). “As you are aware, on an ongoing basis, the company provides us information and some of this is UPS. Being a co-founder, co-promoter and director, this issue takes on great significance,” he said.
Gangwal said after considerable thought, he sees only one clear path to address this issue. “Regrettably, and effective immediately, I am stepping off the board. Accordingly, I ask that no company information be shared with me that is UPS and, having stepped down as a director, there should be no reason to share such information.
“Sometime in the future, I shall consider participating again as a board member,” he added.
The feud between the two promoters – Bhatia and Gangwal – came into public domain after Gangwal had written to market regulator SEBI in July 2019 and sought its intervention to address alleged corporate governance lapses at the company, charges that have been rejected by the Bhatia group.
In 2019, both the promoters had moved the London Court of International Arbitration to resolve their disputes. The court had passed its order on September 23 last year, following which the aforementioned extraordinary general meeting was called to amend the company’s article of association.