Lessons from the Indigo feud
The simmering conflict between the two promoters of IndiGo Airlines is out in the open.
Rahul Bhatia and Rakesh Gangwal, two successful entrepreneurs who drew a dream script in 2006 to build India’s largest airline, are today at each other’s throats. Gangwal, who has a slightly smaller shareholding of 36.7% compared to Bhatia’s 38.3%, and does not have management control, has complained to market regulator SEBI that Bhatia and his InterGlobe Enterprises (IGE) have given governance norms the go-by and participated in shady transactions. Bhatia, on the other hand, has alleged that Gangwal’s charges are directed to shake off management control of InterGlobe, which was part of the terms of incorporation of the company.
It is sad to see that two promoters who did many things right in a tough, competitive industry, are now on the verge of throwing away what they built assiduously. From nothing in 2006, IndiGo today is the largest carrier in India with nearly 50% of market share. IndiGo got many things right - high ‘on-time’ efficiency, sensible logistics by opting for aircraft from only one manufacturer: Airbus; and early large fleet bookings, which it used to cash in through sales and lease back of aircraft.
Unfortunately, the promoters seem to have lost the plot of how to stick together when riding success. Feuds in families born with a silver spoon in their mouths are common. They’ve not had to work hard, and it is always easier to destroy inherited wealth. In this case, it’s been hard work; and so, the road map on how to protect the company from personal vagaries of the promoters should have been built in too.
The takeaway is also that shareholder agreements have to be well drafted. In this case there are two clauses that give right of way to Rahul Bhatia to retain management control. Gangwal wants this changed now, but it may be too late. Yet, a settlement within the parameters of articles of association is always an option; and we hope it happens in the interest of Indian aviation.