The issue of expanding the board’s strength to 10 was put to vote at the annual general meeting (AGM) in New Delhi on Tuesday.
Gangwal agreed to support the proposed changes at the AGM after some of his demands, including on board expansion and related-party transactions (RPTs), were accepted last week, ending months of public wrangling. Although the outcome of the voting wasn’t announced on Tuesday, Gangwal’s decision to back the resolutions last week means they are likely to sail through.
Gangwal had earlier objected to the board expansion as he contended that in the absence or resignation of an independent director, co-founder Rahul Bhatia’s InterGlobe Enterprises Pvt. Ltd (IGE) would have an unfair advantage in approving key policy changes since it has five directors representing it.
“The issue was regarding passage of policy changes in the event of independent director/directors leaving the company," said the person cited earlier. “In the event of death or resignation of an independent director, the proposed board size would have come down to nine members, with five members representing Bhatia’s IGE, four independent directors and one representation from Gangwal, thus giving IGE a majority in the board."
Gangwal, however, skipped IndiGo’s AGM on Tuesday. Also absent from the AGM was independent director Anupam Khanna, who had questioned some of chairman M. Damodaran’s decisions related to the board’s working. This led to several shareholders raising questions on the absence of Gangwal. A few shareholders requested the promoters to settle their differences.
At the AGM, chief executive officer Ronojoy Dutta said RPTs between Bhatia’s IGE and InterGlobe Aviation, which runs IndiGo, now amount to less than 1% of the company’s annual revenue. “Of the total revenue of about ₹30,000 crore, the value of RPTs is around ₹156 crore, which is less than 1% (of the yearly revenue)," Dutta said, adding that all RPTs have been approved by the audit committee of the airline.
“I have been with the company for 9-10 months and I haven’t found a single case where RPTs are not in the best interest of the company," said Dutta.
Gangwal had earlier accused Bhatia of violating corporate governance norms, questioned RPTs with IGE and sought more independent directors on the board.
On 8 July, Gangwal wrote to markets regulator Securities and Exchange Board of India seeking its intervention on corporate governance issues.
Gangwal, in his letter, flagged concerns about certain RPTs and said the shareholders’ agreement provides co-promoter Bhatia with unusual controlling rights over IndiGo. Bhatia has denied the allegations.
Gangwal and his associates hold nearly 37% in InterGlobe Aviation, while Bhatia’s IGE owns around 38%.
Although the two groups own roughly similar stakes, an initial agreement gave special rights to Bhatia’s IGE Group.
Bhatia has maintained that there is no evidence to substantiate Gangwal’s allegations on RPTs.
The disagreement between the promoters led to Gangwal opposing the special resolution at the AGM to increase board members to 10, unless another resolution was passed by the board to prevent the IGE Group from attaining more power and until a new policy on RPTs was adopted by the company.
Meanwhile, Dutta expects the airline’s capacity to grow at 30% a year over the next few years.
“We expect that half of that growth will go international, half will go domestic," Dutta told shareholders of the company, adding that he was optimistic about the airline’s international operations.
The airline is looking at inducting wide-body aircraft as well as Airbus A321XLR for its international operations.
IndiGo currently has a fleet of Airbus A320neo, A320ceo and A321 planes as well as ATR turboprop aircraft that connect domestic and nearby international destinations.
On Tuesday, IndiGo’s shares fell 1.85% to ₹1,649 on the BSE, while the benchmark Sensex gained 0.39% to 37,641.27 points.