New Delhi: The warring promoters of InterGlobe Aviation Ltd, which operates the country’s largest carrier IndiGo, have made peace for now, as both sides have agreed to the changes in the related party transaction (RPT) policy and closed an issue related to increasing the board size to 10 directors.
The company's co-promoter Rakesh Gangwal, who had earlier said he will oppose the special resolution at the AGM to increase the board size to 10, has voted for the proposed changes to the articles of association (AoA) of the company.
“Gangwal agreed to vote for the proposed changes to the AoA of the company after the board closed an open issue on its expansion," said a person with direct knowledge of the matter, requesting anonymity.
“The issue was regarding passage of policy changes in an event of independent director/directors leaving the company. 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 Rahul Bhatia’s InterGlobe Enterprise (IGE), four independent directors, and one representation from Gangwal, thus giving IGE a majority in the board," the person mentioned above said, adding that the board has now agreed to make policy changes only when its composition is intact at 10 members.
Gangwal had earlier accused promoter Rahul Bhatia of violating corporate governance norms, questioned related party transactions and sought more independent directors on the board.
On 8 July, Gangwal wrote to market regulator Securities and Exchange Board of India (Sebi) seeking its intervention to address corporate governance issues. Flagging concerns about certain questionable related party transactions, Gangwal, in his letter to Sebi, had said shareholders' agreement provides co-promoter Rahul Bhatia unusual controlling rights over IndiGo
Bhatia has, however, denied the allegations.
Rahul Bhatia-controlled InterGlobe Enterprises (IGE) had earlier maintained that there are no evidence to substantiate the allegations on related-party transactions between the airline and IGE.
Subsequently, the board of directors of the company have also proposed to increase the board members to 10, including four independent directors, which will be approved by shareholders at the annual general meeting of the company.
Meanwhile, at the company’s sixteenth annual general meeting on Tuesday, IndiGo’s chief executive Ronojoy Dutta told shareholders that related-party transactions (RPTs) of Rahul Bhatia-led InterGlobe Enterprises (IGE) with the airline amount to less than 1% of the total annual turnover of the company, currently at around ₹30,000 crore.
“The current value of RPTs (between IGE and IndiGo) is around ₹156 crore," Dutta said adding that all RPTs have been approved by the audit committee and were at an arms length.
Rakesh Gangwal and his associates hold nearly 37% in InterGlobe Aviation, while Rahul Bhatia’s IGE Group holds around 38%. Although the two groups own roughly similar stakes, an initial agreement gave special rights to Bhatia’s IGE Group.
"Both promoters have for now agreed to the proposed changes to the related party transaction (RPT) policy and closed an issue related to increasing the board size to 10 directors. However, (government) agencies are still looking into issues of corporate governance," said the person mentioned above.
Gangwal had last week said on his website that the latest board decision was a 'positive and important development.'
Gangwal added that while much work lies ahead, including mending some fences and the regulators completing their investigations into the governance issues raised with them, it is gratifying to see progress towards better governance.
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