IndiGo's co-founder Rakesh Gangwal resigns from board with immediate effect

'It is my intention to gradually reduce my stake in InterGlobe over the next 5 plus years,' says Gangwal

InterGlobe Aviation's non-executive, non-independent director Rakesh Gangwal on Friday has tendered his resignation from the company's board with immediate effect.

He will gradually reduce his stake in InterGlobe, parent of the country's largest airline IndiGo, over the next five-plus years, Gangwal said in his resignation letter while adding that a gradual reduction of his stake will also allow him to benefit from some of the upside.

"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 5 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. Like any plan, future events may impact my current thinking."

Gangwal said he was stepping down immediately as he did not want to hold access to unpublished price sensitive information while he began trimming his stake in the company.

"However, I am concerned about the optics of reducing my holdings even though such transactions would only be undertaken when I do not have any unpublished price sensitive information (UPSI). As you are aware, on an ongoing basis, the Company provides us information and some of this is UPSI. Being a co-founder, co-promoter and director, this issue takes on great significance," said the co-founder of IndiGo.

In his letter on Friday, Gangwal said he continues to be a big believer in the long-term prospects of IndiGo and more so now with the industry consolidation underway.

"Under this backdrop and in the long-term, Indian aviation should prosper, as in various other parts of the world," he noted.

On February 4, InterGlobe Aviation announced the appointment of co-founder Rahul Bhatia as the Managing Director with immediate effect.

"Bhatia shall not draw any remuneration from the company during his tenure as the Managing Director," the company had said.

The two had engaged in a spat in early 2020 when Gangwal sought to modify certain rules in the company's articles of association.

Gangwal had alleged violations in corporate governance rules at the parent group and wanted to remove an article that prevented co-founders from buying publicly-listed shares in InterGlobe and potentially trigger an open offer for the rest of the company.

The differences between the promoters became public in July 2019 after Gangwal wrote to the Securities and Exchange Board of India, seeking its intervention to address corporate governance lapses at the company. Bhatia’s IGE Group had rejected the allegations. In 2019, both the promoters had moved the London Court of International Arbitration to resolve their disputes.

The court had passed its order on September 23 last year, following which an extraordinary general meeting was called to amend the company's AoA.

In December last year, the shareholders of the parent company approved changes to articles of association, including scrapping rules that restricted sale or transfer of shares to a third party.

The passage of the special resolution paved the way for resolution of a dispute that has been going on between Gangwal and Bhatia since 2019.

Gangwal and his related entities own around 37% stake in this company. Bhatia and his related entities own around 38% in InterGlobe Aviation.

An American and aviation industry veteran, Gangwal has spent several years in senior roles at United Airlines and US Airways.