Business Today – August 25, 2019

participating in aircraft and related

acquisition activities, which Bhatia

said was the principal reason for him

to take Gangwal on board. The rift

kept growing until last October, when

Gangwal wrote two back-to-back let-

ters to the chairman seeking board

approval to amend the policies for re-

lated party transactions between the

airline and Bhatia’s IGE Group. This

was followed by two letters from the

Bhatia camp challenging the objec-

tions raised by the Gangwal camp.

The Bhatia camp also asked for an

independent review of related party

transactions between IndiGo and

IGE Group. Damodaran asked the

airline to engage audit firm EY for

this. Later on the basis of the EY re-

port, he found procedural irregulari-

ties in related party transactions and

asked for an examination by an inter-

nal committee.

The spat took an ugly turn early

this year when Bhatia wrote to the

board, saying the objective of the RG

Group was not to investigate related

party transactions but to malign the

image of the IGE Group, destabilise

the management and grab manage-

ment rights. “The script of the play

stands exposed even more starkly as

CORPORATE>INDIGO

US Airways, for instance, he had ordered for 400 A320-family planes and
30 A330 widebodies from Airbus, creating a huge leverage for himself that
he would encash at IndiGo.
Following an Indian Airlines accident in 1990, involving an Airbus
plane, the French aircraft maker’s India order book had dried up. With
Boeing capturing nearly 90 per cent of the market as a result, Airbus was
eagerly looking to make a comeback. A protégé of US aviation veteran and
his boss at US Airways, Stephen Wolf, Gangwal knew this well. Despite
being from a start-up airline, he managed to crack a highly-profitable
100-aircraft deal with Airbus, which brought the airline $4-5 million
profit per aircraft in years to come. Gangwal also spearheaded the subse-
quent orders for 430 Airbus planes and Pratt & Whitney (P&W) engines.
So far so good. The cracks appeared when Bhatia presided over negotia-
tions for a $20-billion deal to replace P&W (which were creating problems
for the airline) with CFM International engines to power the 280 Airbus
A320neo and A321neo aircraft in IndiGo’s f leet. Bhatia reportedly got a
highly-lucrative deal with CFM, and even engaged former Airbus India
chief Kiran Rao to assist him in the deal – all in the absence of Gangwal. In
a give-and-take type of arrangement between the two, it was perhaps seen
as a transgression by Rakesh Gangwal’s RG Group.
“With all these events taking place one after the other, there has to be
some correlation. A contract that would have been negotiated by Gang-
wal out of his past expertise was given to some other party. Related party
transactions and unusual rights are not new. Why has Gangwal suddenly
realised these things are not right? There would be some linkages,” says an
aviation expert who didn’t wish to be quoted.

War of Words
The fight started early last year when, according to Bhatia, Gangwal
asked him to expand the board. Bhatia said he was fine with this as long
as his board representation remained intact, which meant 50 per cent
IGE Group nominees. This seemed to have irked Gangwal, who stopped

62 IBUSINESS TODAYIAugust 25 I 2019

THE SPAT

TIMELINE

EARLY 2018

Rakesh Gangwal asks Rahul Bhatia to

add more members to the board. Bhatia

agrees as long as his representation is

maintained in the proportion mentioned

in the shareholders' agreement.

Gangwal withdraws from aircraft and

related acquisition activities

OCTOBER 15

Gangwal writes to the

board for amendments

to policy on related

party transactions with

Bhatia’s IGE Group

OCTOBER 30

Bhatia addresses the board,

suggests independent review

of all related party transactions

with IGE Group

JANUARY 30

Bhatia writes to the board

rejecting Gangwal's

demand for an EGM,

and accuses him of

hijacking the airline

and grabbing rights

JUNE 5

The IndiGo chairman calls for a

board meeting to discuss the EGM

requisition by Gangwal. IGE Group

nominees on the board – Rahul

Bhatia, Rohini Bhatia and Anil

Parashar – decide to be no-shows

JULY 8

Gangwal writes to the Sebi top

brass on related party transactions

between IndiGo and IGE Group

and decries corporate governance

norms at the airline

JULY 24

IndiGo Chairman M. Damodaran brokers

truce between the co-founders. The

IndiGo board approves a new policy for

related party transactions and agrees to

expand the board strength to 10