InterGlobe Aviation Ltd which is the parent company of India’s largest airline IndiGo has its shares slumping over 17% on Wednesday after its co-founder raised corporate governance issue with market regulator Securities and Exchange Board of India (Sebi).
The stock touched a low of ₹1291 and fell as much as 17.55%. At 9.30 am, the scrip was trading at ₹1327.30 on BSE, down 15.23% from previous close. So far this year it has gained 21%.
Rival SpiceJet Ltd surged 8% to ₹126.65.
“The fight between two founders has added to the uncertainty of the performance of the business going forward”, said analyst with a condition of anonymity.
Rakesh Gangwal has written letter to Sebi’s alleging several violations at IndiGo including those pertaining to related-party transactions; appointment of senior management personnel, directors and the chairman, who has always been an independent director by convention.
Analyst expects the fight between the two founders could potentially impede IndiGo’s strategy to expand its presence to overseas destinations and consolidate its dominance of Indian skies.
“The conflict between the two promoters will throw open issues of governance from which India Inc has already been ailing and the shareholders suffering. This too is seen going the same way resulting in trust deficit from the investors going forward, as corporate compliance is increasingly becoming a bone of contention”, analyst said on a condition of anonymity.
In his letter, Gangwal who holds 36.68% stake in Indigo has sought permission to hold an extraordinary general (EGM) meeting, alleging that the company has participated in objectionable related-party transactions (RPTs) and has not complied with corporate governance standards.
The charges, however, were denied by Bhatia, saying that the Companies Act gave the powers to the board of the company to decide its functioning, who accused Gangwal of trying to dilute the controlling rights of his holding company InterGlobe Enterprises Pvt. Ltd (IGE) in the low-fare carrier, IndiGo.