Mumbai: Rahul Bhatia, one of the two founders of InterGlobe Aviation Ltd, will not accept a dilution of his shareholder rights unless there is a compelling offer from his estranged partner Rakesh Gangwal, a person aware of the development said.

Bhatia is, however, open to a deal with Gangwal to resolve differences over shareholders’ rights that may include acquiring a part of Gangwal’s stake in the company if he chooses to sell, the person said, requesting anonymity.

While the two founders of InterGlobe Aviation, which runs budget airline IndiGo, have settled their differences over some issues, including expanding the airline’s board and related-party transactions, the negotiations so far have not touched the elephant in the room—the lopsided shareholders’ agreement that gives Bhatia’s InterGlobe Enterprises Ltd sweeping rights although both parties have nearly equal shareholding.

While the decisions taken by the IndiGo board over the weekend are expected to have addressed some of the concerns raised by Gangwal, it won’t give him more say in the running of India’s largest airline.

The Bhatia group is of the view that the shareholders’ agreement between the co-founders and the rights that the Bhatia group has in the carrier are private matters between the two parties.

The reworked 10-member board of IndiGo will have four independent directors in addition to Gangwal and five directors nominated by the Bhatia group, one of whom would be the chief executive, said the person. Bhatia’s InterGlobe Enterprises had the right to nominate the CEO earlier, too, but he was not on the board, explained the person. The board of IndiGo has also reached out to former PepsiCo Inc. CEO Indra Nooyi to be an independent director, the person said. The board had on Saturday stated that the company will seek shareholders’ nod for appointing a woman director, a demand flagged by Gangwal in his letter to the capital markets regulator earlier this month.

According to the decisions taken by the board on Saturday, the four independent directors will decide on any policy change on related party transactions in which neither Bhatia nor Gangwal will have a say. Gangwal had demanded “checks and balances" although he did not object to related-party transactions per se between InterGlobe Aviation and companies related to Bhatia. InterGlobe Enterprises had earlier this month clarified that related-party deals were not significant and accounted for only 0.53% of InterGlobe Aviation’s consolidated sales for FY19.

InterGlobe Enterprises will wait for a decision from the markets regulator and the ministry of corporate affairs on the charges of corporate governance lapse in the company made by Gangwal.

A second highly-placed executive who is privy to the discussions between the two groups said the two parties were still ironing out the differences related to management, including related-party transactions. “IndiGo, which is a national asset, is bigger than both promoters. Increasing the number of independent directors on the board of directors is a huge progress," said the second person who also did not want to be named.

“However, there are several issues that are yet to be sorted. We are hoping for this to happen," said the person, adding that Gangwal is likely to stay in India till all the issues are resolved.

Bloomberg had reported on 16 July citing Gangwal that he has no desire to sell or raise his stake in IndiGo. Gangwal has a nearly 37% stake in InterGlobe Aviation, while the Bhatia group has more than 38%.

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