With loopholes plugged, Rakesh Gangwal will not attend IndiGo AGM on August 27

Ashwini Phadnis New Delhi | Updated on August 26, 2019

Rakesh Gangwal

No turbulence seen at IndiGo AGM today

The expected fireworks at IndiGo’s AGM on Tuesday are not likely to happen after all, as co-promoter Rakesh Gangwal is not attending it.

This became clear from Gangwal’s statement issued last Friday, where he said he will support the proposed changes to the company’s Articles of Association.

Earlier in the day, he had said: “The board has now approved a new related party transaction policy and to also close an open issue if the Articles of Association are amended at the upcoming August 27 AGM to increase the board size to 10 directors.”

Board strength

Earlier, Gangwal had made it clear that he would vote against any resolution unless loopholes in increasing the size of the board to 10 were plugged.

Gangwal’s fresh update in the bitter battle that he is having with IndiGo’s other co-promoter, Rahul Bhatia, came as a surprise to many as the IndiGo board had issued a statement on July 21, soon after a board meeting, that its strength would be raised to 10.

According to some, Gangwal’s Friday statement had to do with the fact that though the IndiGo board had issued a statement agreeing to increase the board’s strength, there were still “one or two loopholes which needed to be closed”.

Greater say for IGE

For instance, when the number of directors on the board is increased to 10 from the current six, will the InterGlobe Enterprises (IGE) group end up having a greater majority on the IndiGo board? It can then pass any policy it wants. IGE and its founders, Rahul Bhatia and family, are one of the two promoter groups of IGAL, which owns and promotes IndiGo. In his Friday statement, however, Gangwal did not make it clear how this loophole has been plugged.

Secondly, if one of independent directors resigns, retires or passes away, a situation could again arise where IGE directors will have more than a majority. This will likely be a short spell — say two or three months, till another independent director is appointed. But, in the interim, IGE can pass any resolution or policy change at IndiGo.

Apparently, the two warring factions have agreed that no resolution issue will be taken up or passed if such a situation arises.

If the AGM ratifies the increase in the board strength, the IGE group will collectively have the right to appoint five of the 10 directors while the Gangwal group will be allowed to appoint one director. In addition, there will be four independent directors.

The AGM will also consider the appointment of M Damodaran as an independent director.

It is in this context that Gangwal issued the statement saying he will support the resolution, following which the AGM has become a non-event.

Related party transactions

Market watchers say the other major issue which Gangwal raised — of related party transactions — has also been sorted out, as it does not need to come up before the AGM.

“Now the AGM will be a non-controversial routine meeting as everything has been agreed upon beforehand,” a market watcher said.

Published on August 26, 2019

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