Why IndiGo’s Extraordinary General Meeting Today Matters

InterGlobe Aviation Ltd.’s extraordinary general meeting, which will be held today, could not only put an end to the ongoing promoter dispute but also remove a major overhang on the stock price of India’s largest airline.

Rakesh Gangwal, co-founder of InterGlobe Aviation, had called for an EGM to amend the articles of association, that will allow the promoters to buy or sell their stake.

In April 2015, Gangwal along with Rahul Bhatia, another co-promoter, had signed a shareholder agreement that placed restrictions on the transfer of their equity stake and/or acquisition of a new stake. The said restriction ended on Nov. 10, 2019— four years after the airline’s initial public offering.

Gangwal and Bhatia have been sparring over questionable related-party transactions and the composition of the company’s board. The spat between the two co-founders had first emerged in May last year and since then the share prices are down over 5 percent. This is despite strong financial performance reported by the company.

If the special resolution is passed in the EGM, then there is a possibility of the Gangwal group selling either full or part of its stake in the company. Currently, the Gangwal Group owns a 36.6 percent stake in the company which is valued at close to Rs 21,000 crore.

Qatar Airways, U.S.-based Delta Airlines and IndiGo’s co-founder Rahul Bhatia are the top contenders to buy Gangwal Group’s stake in the company.

Rahul Bhatia Group, which currently owns nearly 38 percent stake in InterGlobe Aviation could look to increase its stake using the right of first refusal—thereby avoiding the possibility of another strong investor on the board.

Qatar Airways first showed interest in acquiring a stake in IndiGo in 2015. The Gulf-based state-owned carrier recently signed a code-share partnership with IndiGo. Its chief executive officer had said that the airline is keen on buying as much stake as possible in InterGlobe Aviation. Qatar owns a stake in other airlines like China Southern Airlines, Cathay Pacific, Air Italy, International Airlines Group and LATAM Airlines.

Delta Airlines could also be a potential buyer as it is looking to expand operations in India. The airline resumed direct services between Mumbai and New York last month and also expressed optimism about making money on this route. It also owns a stake in various other global airlines like Aeromexico, Virgin Atlantic, Air France KLM, China Eastern, among others.