Differences between promoters over terms of related party transaction: IndiGo

IndiGo’s co-founder Rakesh Gangwal wants “higher standards” when the airline gets into related party transactions, a demand that is the bone of contention between him and business partner Rahul Bhatia, a top executive at the airline said Monday.“The differences (between the two promoters) is that Mr Gangwal wants higher standards while following related party transactions,” the executive said on the condition of anonymity. “He wants an additional step.”The two promoters were trying to resolve their differences, the executive said.Related party transactions are deals or arrangements between two parties who are joined by a pre-existing business relationship or common interest. In IndiGo’s case, it would, for instance, be the airline’s contract with Novotel, locally owned in part by Bhatia’s Interglobe Enterprises for crew accommodation.The executive clarified the transactions are done at “arm's length” and through a tendering process and Interglobe owned companies don’t always win the contracts.ET had on May 16 reported the differences between the promoters, which if unresolved would hamper the working of the airline.Legal firms Khaitan & Co and J Sagar Associates are helping the founders resolve the problems.On May 18, IndiGo’s CEO Ronojoy Dutta acknowledged there “may be differences” between the promoters .Later, after IndiGo announced its earnings, Dutta reiterated there are differences but said they weren’t about growth strategy, overseas expansion or management changes.Dutta said the promoters are debating “one issue” which will be “resolved soon”.Gangwal, a United Airlines and US Airways veteran, has been the driving force behind IndiGo’s emergence as one of the fastest growing carriers in the world.Gangwal crafted IndiGo’s record-breaking plane orders, its aggressive expansion in India and the ambition to make it a global carrier, which resulted in major changes to the senior management. Gangwal is a US citizen. Bhatia ran the show in India, ably supporting the airline’s growth and manoeuvring regulatory hurdles.Differences cropped up in the last couple of years, with Gangwal insisting IndiGo shouldn’t break its momentum of aggressive growth, while Bhatia opted for a more cautious approach.There were differences also in choosing senior management personnel.Sources have said the differences between the promoters stemmed from a shareholders’ agreement heavily skewed in favour of Bhatia. The agreement expires in October.But in a statement, Gangwal had earlier clarified he didn’t want control of the airline.“I am categorically and clearly stating that there is no interest or desire whatsoever on the part of the RG (Rakesh Gangwal) Group to take control of the company. Also, to put to rest the messaging on the fact that the RG Group is attempting to renegotiate the Shareholders Agreement, I am placing on record that the RG Group stands by the current SHA which, in any case, expires this October”.

from Economic Times https://ift.tt/2XvAU1H