Rakesh Gangwal, the co-founder of IndiGo, told
CNBCTV18.com, he has sought the Prime Minister’s intervention to fix the corporate governance issues he has raised at the parent company with market regulator Sebi. Gangwal, who is embroiled in a bitter tussle with co-founder Rahul Bhatia, said said he is not looking to gain control of InterGlobe Aviation, which runs IndiGo. CNBCTV18.com sent a set of questions to Bhatia to gather his side of the story. A spokesman for his IGE Group responded on his behalf. Edited excerpts: 1. Gangwal has told — which he also said in the letter to Sebi — that his fundamental problem is with how the related party transactions (RPTs) are structured and corporate governance issues. What are your thoughts? CNBCTV18.com
The issue of RPTs that Mr Gangwal is raising is such a smokescreen and a red herring. To cut a long story short, we should point you to para 3 of Mr Bhatia’s letter to the InterGlobe Aviation board, dated June 12, 2019 (posted on the stock exchanges) that Mr Gangwal, after raising the demand for revisions to the RPT policy was immediately willing to make it a part of a ‘package deal’ as laid out in RG’s proposal package in an email of May 29, 2019. Fundamentally, RG created the package of sweeping changes to the founding principles of the company and other conditionalities around the RPT’s policy discussion. A careful reading of Para 3, page 2 of the said letter will provide you with the context.
2. Gangwal has said he is not planning to take control, countering your statement on Wednesday. If that was so, why then would he demand more independent directors, according to him?
Anyone with even a rudimentary knowledge of the changing regulatory landscape in India would know that companies have to be in compliance reference women directors. Please refer to the said para 3 again. IGE Group has been willing to discuss the expansion of the board but it is Mr Gangwal who has made that also a part of his ‘package deal’. Further, Mr. Gangwal has not hidden his desire for dilution of IGE Group’s rights and his desire to walk away from the mutual obligations between the parties.
3. According to Gangwal, when he proposed an increase in the strength of the board to eight, giving you the right to name another nominee and greater control, in return for overhauling the structure of RPTs, you rejected the proposal. Please let me know your thoughts on this matter.
This is the crux of Mr Gangwal’s misinformation campaign. Rather than IGE rejecting the proposal, the IGA board decided not to engage with Mr Gangwal’s unreasonable, illegal and extortionist demands to trade his ‘package deal’ in return for his consent on other issues. To cite, “The IGE Group nominee directors were constructively engaged in discussing the policy and processes on RPTs (a discussion that had been initiated by Chairman Mr Damodaran after he joined the board in January 2019) without being influenced by any other considerations in the belief that such policy should be reviewed irrespective of any other matters. It was Mr Gangwal who created the package of sweeping changes to the founding principles of the company and other conditionalities around the RPT’s policy discussion… which led to the IGE group nominee directors to desist from further deliberations. It is Mr. Gangwal who scuttled the process.
4. I have gathered that greater control to you is of no use if the RPTs are overhauled. Please comment.
Please be aware that the issue of control and of RPTs is totally separate. The RPTs have been not only at arm’s length but actually more favourable to IGAL. The RPTs are of no material significance to IGA; as laid out threadbare in our media note of July 10, 2019, the monetary value of the four RPTs currently in force amounts to no more than 0.5 percent of IGAL’s consolidated turnover. Mr Gangwal is no stranger to these facts, yet he uses the explosive issue of RPTs to hang his own devious agenda.
5. On RPTs, when I pointed out to how their value is only a fraction of InterGlobe Aviation’s total revenues and that it has been declining in recent years, which you highlighted, he said it was because he put his foot down on certain arrangements, especially the passenger and cargo GSAs. He also said, if the GSAs were in the best interests of the company, why weren’t they renewed. Please comment.
Really, did he claim that in a published interview? Mr. Gangwal is certainly making contradictory statements – on the one hand he takes the stance that the influence of IGE Group is overarching – and then he says that certain RPTs came to an end because he put his foot down! How are these two statements consistent? The facts about the GSAs are stated in paragraph 3 of our July 10 media note. IGAL had desired to create its own sales infrastructure for domestic cargo and domestic passenger sales. Domestic passenger GSA came to an end in 2016; and the cargo GSA was arbitrarily terminated by IGAL in 2015. IGE Group accepted those decisions. If IGE group was actually influencing the decisions on RPTs, then how could the non-renewal and termination occur? This actually shows that IGAL has acted independently. Talking about the interests of the company, what needs to be examined is the outcome of those decisions. The IGE Group believes that IGAL has lost sales post the termination of the GSA relationship. Those facts can be established.
6. Mr Gangwal told me that he came to know about the GSAs only at the time of the IPOs. Is this true?
That is not correct. The GSA Agreement between IndiGo and IGE was executed in 2006, a fact very well known to Mr. Gangwal because it gave IndiGo a commercial advantage by giving it an overnight distribution reach across India without incurring any expenses. This Agreement was signed by the first CEO, Bruce Ashby, a US national introduced and nominated by Mr. Gangwal to IndiGo. Bruce Ashby and Mr. Gangwal engaged in weekly calls to discuss operational and other matters in IndiGo. Mr. Gangwal participated in all review meetings in India and in the US on various commercial aspects and financials of the business, a documented fact in the company. This is yet another example of Mr. Gangwal denying and twisting facts.
7. What is your line of action going to be given that Mr Gangwal pursuing the matter vigorously?
Let the truth be pursued. Mr. Gangwal can continue with his own pursuit of bluff and bluster. The IGE Group has a tradition of not overreacting. We will continue to simply place facts before all stakeholders including the regulators. The truth will emerge.
CNBC-TV18's exclusive interview with IndiGo co-founder Rakesh Gangwal