IndiGo shares slump on 'bitter tussle' between founders

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BENGALURU (July 10): An escalating dispute between the co-founders of India's largest airline IndiGo sent the shares of its parent firm tumbling by about a fifth on Wednesday, with allegations of governance lapses raising concerns about the carrier's future.

Interglobe Aviation Ltd shed as much as US$1.7 billion in market value and its shares were on course for their biggest one-day fall since January 2016 over concerns the public row would prove an unwelcome distraction for the budget carrier, which has benefited from the recent collapse of Jet Airways.

Low-cost rival SpiceJet Ltd's shares climbed as much as 9%.

IndiGo co-founder Rakesh Gangwal on Tuesday alleged violation of corporate governance rules at the parent group and also asked the country's securities regulator to intervene in the matter.

The move suggested that a previously reported row between Gangwal and fellow co-founder Rahul Bhatia was escalating.

In a memo to staff seen by Reuters, IndiGo Chief Executive Ronojoy Dutta said it was important for employees to remain focused on running a high-performance airline despite the differences of opinion between the founders.

"Our mission, direction and growth strategy remains unchanged, and firmly in place," Dutta said.

A representative for IndiGo did not immediately reply to a request seeking comment.

Under co-founders Gangwal and Bhatia, IndiGo has grown rapidly since it launched flights in 2006 and now controls a near 50% share of the Indian domestic aviation market. The carrier, Asia's most valuable budget airline by market capitalisation, has also accelerated international expansion plans since Jet's collapse in April.

"I have vigorously attempted for almost a year to persuade the company to shore up its governance standards, and all my attempts have been thwarted by the IGE Group," Gangwal said in a letter to the Securities and Exchange Board of India (SEBI), referring to Bhatia's affiliate group.

Gangwal and his affiliates own nearly 37% of Interglobe, while Bhatia controls about 38%, giving both a major say in its strategy and plans.

At the centre of Gangwal's complaint are IGE and Bhatia's significant controlling rights over IndiGo, which Gangwal says allows them to carry out "questionable" transactions between IGE and Interglobe.

IGE has the power to appoint three out of six directors, nominate the chairman and select the top executives, Gangwal said.

The controlling rights should not enable transactions that violate the company's code of conduct and are not in its best interests, Gangwal said in a letter to Interglobe's board in May, the company's filing to the BSE Ltd stock exchange showed on Tuesday.

Gangwal's RG Group was misleading shareholders by "putting out false allegations and incomplete and incorrect facts", Bhatia told the board in January, the filing showed.

The allegations represent a "subterfuge" to force a change of the governing structure and controlling rights at the company, Bhatia had said.

SEBI has sought a reply from Interglobe by July 19 on the matter.

Analysts at Mumbai-based ICICI Securities said despite the "bitter tussle" between the founders, they maintained their "buy" rating on Interglobe's stock, noting its strong business fundamentals.