India’s largest airline IndiGo's shares slump

BENGALURU: Shares of Interglobe Aviation, which owns India’s largest airline IndiGo, fell as much as 19% on Wednesday after one of its co-founders alleged violation of corporate governance rules at the parent group.

Interglobe shares hit their lowest since March and were on course for their worst day since January 2016.

IndiGo co-founder Rakesh Gangwal on Tuesday also asked the country’s securities regulator to intervene in the matter, a move that suggests that a previously reported row between Gangwal and fellow co-founder Rahul Bhatia was escalating.

“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 Tuesday’s letter to the Securities and Exchange Board of India (SEBI), referring to Bhatia’s affiliate group.

Gangwal and his affiliates own nearly 37%, while Bhatia controls about 38% in Interglobe, 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.

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 took note of the quarrel between the founders, but maintained their “buy” rating on Interglobe’s stock, noting “strong business fundamentals”.

Meanwhile, shares in IndiGo’s rival SpiceJet climbed as much as 9% on Wednesday.

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