Clearing the air about the differences between the two promoters of IndiGo, chief executive officer
Ronojoy Dutta today told that there is only one administrative issue and that is related to the terms of related party transaction. CNBC-TV18
Rakesh Gangwal, a United Airlines and US Airways veteran, wants to bring more layers to the related party transaction process and several proposals are being discussed between him and Rahul Bhatia, who is the managing director of InterGlobe Enterprises, the promoters of IndiGo.
“The issue has got to do with related party transaction so as an example InterGlobe sells services to the airline IndiGo. The headquarters we are in, so the landlord is InterGlobe so we pay a certain rent, hotels, our crews stay overnight at various places and when they stay in let’s say Chandigarh or Jaipur, Sheraton, Holiday Inn, Novotel all bid for that. InterGlobe has a shareholding in Novotel, these are related-party transactions and it is a matter of how you deal with them that the two promoters are talking about now,” Dutta clarified.
Dutta was speaking over a month after media reports emerged about potential disagreements between the two promoters of IndiGo — Bhatia and Gangwal.
“We all know, that in any strong and well-managed company there will always be differences. And, yes, there may be differences currently on certain matters but the company has a great track record of resolving issues and coming out ahead. If the current differences were to not get resolved, you shall certainly hear about it. However, it serves no purpose speculating about it,” Dutta in a statement dated May 18 said.
“I am authorised by Mr. Rakesh Gangwal to make the following statement on his behalf — “I am categorically and clearly stating that there is no interest or desire whatsoever on the part of the RG Group to take control of the company. Also, to put to rest the messaging on the fact that the RG Group is attempting to renegotiate the Shareholders Agreement, I am placing on record that the RG Group stands by the current SHA which, in any case, expires this October,” the statement said.
Today, Dutta said that as the difference is not a part of the shareholders agreement, it does not necessarily have to get resolved by October.
“Shareholders agreement expires in October but there is an article of association and that continues so we have not gone any further than that...It is not airline-related. It is not an airline issue. It is an agreement issue between the two promoters. It is in the language of what they have agreed to…we are going back and forth with different proposals… this is not tied to October, it is an administrative issue,” Dutta said.
Adding that the chairman of the board M Damodaran, who was the former chairman of the Securities and Exchange Board of India [Sebi], is looking at the matter, Dutta said that the expectation is that the issue will get resolved at some point in time but it is not something for which promoters part ways as the amount involved is very small as compared to the scale of operations at IndiGo.
"It's not differences. It's a difference. It's an administrative issue. It has no impact on the company, it has no impact on management and fortunately, for me, Mr Damodaran is very experienced and well-versed in these issues. He is handling it. We hope to resolve it soon. But look there are always differences between promoters, it will be hard to find a company where there are no differences. There is very clear law in this and as Mr Damodaran is fond of saying, 'Tata steel sells steel to Tata Motors'. So it is about dealing at an arm’s length, the only issue that they are talking about is do we need to modify this related party transaction process in any meaningful way and at some point. It will get resolved,” Dutta said.
“Rahul Bhatia is the owner of InterGlobe. He is the landlord of the property, he has shareholding in Novotel. Rakesh Gangwal is saying that I want to change this related party transaction process. He would like to add one layer over and above that. And we are discussing that issue,” Dutta said, adding that the company is fully compliant of all applicable norms.All related party transactions added up to around $30 million for IndiGo in 2018-19 (April-March), while this year it is expected to go down to around $20 million, Dutta clarified.