What Led Rakesh Gangwal To Sell His Shares In IndiGo In February 2022, Rakesh Gangwal had stepped down from the InterGlobe Aviation board as a non-executive, non-independent director, and had said that he would sell his entire holding in IndiGo over a period of five years. Gangwal and family sold a 4 per cent stake totaling INR 3,730 crore in the company in block deals

Rakesh Gangwal and family, co-founder of IndiGo Airlines, sold a 4 per cent stake totaling INR 3,730 crore in the company in block deals, as per reports. This is not an isolated case. Gangwal started the process of selling his stake in IndiGo in September, 2022.

IndiGo was founded in 2006 as a private company by Rahul Bhatia of InterGlobe Enterprises and Rakesh Gangwal. InterGlobe had a 51.12 per cent stake in IndiGo and 47.88 per cent was held by Gangwal's Virginia-based company, Caelum Investments.

Backstory

In February 2022, Rakesh Gangwal had stepped down from the InterGlobe Aviation board as a non-executive, non-independent director, and had said that he would sell his entire holding in IndiGo over a period of five years. "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. While new investors should benefit from the potential future growth in the Company's share price, a gradual reduction of my stake should also allow me to benefit from some of the upside," Gangwal had said in his resignation letter then.

In September 2022, the Gangwal family and their trust had sold a 2.8 per cent stake through a block deal for $250 million or INR 2,000 crore and in February this year, they sold a 4 per cent stake for INR 2,900 crore.

Friends turn foes

The dispute between the co-founders started in 2019 when Gangwal wrote to the Securities and Exchange Board of India (Sebi) accusing Bhatia of indulging in questionable related-party transactions and violations of fundamental governance norms and laws. Bhatia, too, wrote to Sebi countering Gangwal's allegations.

In his letter to Sebi in 2019, Gangwal had highlighted, "IndiGo is one of the most successful aviation companies in the world and not just in India. However, today, IndiGo is at a watershed moment. It has started veering off from the core principles and values of governance that made IndiGo what it is today. Having spent more than 30 years working in and leading some of the most reputed airlines in the world, including United Airlines, Air France, and US Airways, I decided to join hands with Mr. Bhatia, a longtime liS friend, to build a large air transportation network in India that would make the nation proud. Rooted from a deep trust built over a decade-long friendship and with no desire on my part to have any meaningful control of the Company, I entered into a shareholders' agreement that allows Mr. Bhatia to have unusual controlling rights over IndiGo."

These controlling rights give IGE Group, a minority shareholder, significant influence over the decisions of IndiGo. "I hadn't contemplated that over the years, Mr. Bhatia would start building an ecosystem of other companies that would enter into dozens of related party transactions with IndiGo. We are not against RPTs as long as proper checks and balances exist and such RPTs are in the best interest of the Company. Beyond just questionable RPTs, various fundamental governance norms and laws are not being adhered to and this is inevitably going to lead to unfortunate outcomes, unless effective measures are taken today. Allow me to bring to your attention some of the events that demonstrate the collapsing corporate governance standards at IndiGo," the letter further added.

Current scenario

Fast forward, IndiGo remains India's largest airline with a market share of 61.4 per cent. Crossing another milestone, the market valuation of InterGlobe Aviation, the parent of IndiGo, reached INR 1 lakh crore mark in June 2023. It is the first Indian airline to achieve this breakthrough. In the Paris Air Show, IndiGo, defining its long-term future, placed a firm order for 500 Airbus A320 Family aircraft. This will provide IndiGo a further steady stream of deliveries between 2030 and 2035. This 500 aircraft order is not only IndiGo's largest order, but also the largest-ever single aircraft purchase by any airline with Airbus.

IndiGo operates over 300 aircraft and has previous orders totaling 480 aircraft which are yet to be delivered between today and the end of this decade. With this additional firm order of 500 aircraft for 2030-2035, IndiGo's order-book has almost 1.000 aircraft yet to be delivered well into the next decade. With this new order, since its inception in 2006, IndiGo has ordered a total of 1.330 aircraft with Airbus.