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IndiGo founders try to find middle ground on thorny issues

There were detailed discussions over the expansion of the board, which now has six members including two independent directors.

ET Bureau|
Jul 22, 2019, 07.35 AM IST
MUMBAI: The two warring founders of IndiGo are trying to find a middle ground on the contentious issue of related-party transactions, a day after a board meeting ended, but a consensus is still elusive, two people close to the matter said.

“The talks are still inconclusive,” one of the people said, but added that they might come to an agreement by Monday.

Late on Sunday night, Inter-Globe Aviation, which operates the airline, said the board decided to expand its strength to a maximum of 10 members, including four independent directors, a sign that there was some progress in the discussions as there were disagreements over the compositions of the board.

On related-party transactions, the company plans to put in place a new policy which will ensure all such agreements have its audit committee’s approval, the person said.

Related-party transactions are those where IndiGo signs deals with companies owned or part-owned by founder Rahul Bhatia’s conglomerate, InterGlobe Enterprises Group (IGE). Cofounder Rakesh Gangwal has complained to market regulator Securities and Exchange Board of India that several transactions signed in the past few years did not have the audit committee’s approval.

The new policy was mulled over on the second day of the two-day board meeting. The board on the first day considered and approved the airline’s record earnings for the June quarter — a net profit of Rs 1,203 crore. On the second day, the members considered the contentious issues raised by Gangwal. In the meeting, Gangwal insisted that any amendment to the new policy must need unanimous board approval, the second person said. However, this did not find favour among other board members, as they feared it would mean veto power to Gangwal. It was later agreed that the audit committee would ensure that all related-party transactions are as per current guidelines.

There were detailed discussions over the expansion of the board, which now has six members including two independent directors.

Bhatia wanted two more nominees from his group which would take its representation to five members. Sunday’s filing with stock exchanges didn’t say whether he would have more representation on the board.

The current shareholders’ agreement is heavily skewed in favour of Bhatia, which is something Gangwal has raised during the board meeting. Bhatia’s IGE Group has the right to appoint three out of six directors at the airline, nominate the chairman as well as nominate and appoint the managing director, the CEO and the president. The rights are embedded in the articles of association formed before the inception of the airline.

Most of these are likely to remain, the people who spoke to ET said.

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