Co-founder of India’s IndiGo quits board, to cut stake

IndiGo Airlines (6E, Delhi Int’l) shareholder and co-founder Rakesh Gangwal has resigned from the board of parent InterGlobe Enterprises and plans to gradually downsize his stake over the next five years, InterGlobe said in a filing to the National Stock Exchange of India.

The development appeared to end a long-running feud with fellow co-founder and managing director Rahul Bhatia, which culminated in late December when shareholders approved changes to the company’s articles of association including removing a rule that restricted sale or transfer of shares to a third party.

The spat between the two erupted in July 2019 when Gangwal alleged corporate governance lapses at the company.

“I have been a long-term shareholder in the company for more than 15 years and it’s only natural to someday think about diversifying one’s holdings. Accordingly, my current intention is to slowly reduce my equity stake in the company over the next five plus years,” Gangwal said in a resignation letter that InterGlobe Enterprises attached to the exchange filing.

He explained that he was stepping down as he felt “concerned about the optics” of holding access to unpublished price sensitive information while he starts to trim his stake.

“Being a co-founder, co-promoter and director, this issue takes on great significance. After considerable thought, I see only one clear path to address this issue,” he said, adding that his resignation from the board was effective immediately. However, he concluded: “Sometime in the future, I shall consider participating again as a board member.”

Gangwal and his family own a combined 36.61% stake in InterGlobe (Gangwal himself with 14.65%, his wife Shobha with 8.39%, and the Gangwal-run Chinkerpoo Family Trust with 13.57%), while Bhatia and his family hold 38.17%, giving them both a major say in the carrier’s strategy.

The adjustment in the articles of association could potentially trigger an open offer for one of these groups of shareholdings. This could be vital as IndiGo prepares to take on the mega Tata Sons grouping of Air India, Air India Express, AirAsia India and Vistara.

An American billionaire and aviation industry veteran, Gangwal has spent a number of years in senior roles at US Airways Group and United Airlines (UA, Chicago O’Hare), while Bhatia has been in India running IndiGo’s day-to-day operations.

According to the financial news site Moneycontrol, Gangwal now plans to accelerate investments in other assets. He has an affinity for disruption – which is why he bet on no-frills carrier IndiGo – and has been investing in US and European startups pursuing disruptive technologies.