IndiGo Crisis: Are Markets Reading Too Much into Rahul Bhatia-Rakesh Gangwal Rift?
Despite facing setbacks recently such as the Pratt and Whitney engine issue and exits at the top level, IndiGo CEO assures that the growth strategy of the airline remains unchanged and firmly in place.
File photo of an IndiGo Airlines flight.
IndiGo investors have hit panic mode, with shares falling nearly 3% in intraday trade on Friday, topping the 9% drop seen on Thursday.
Reports of differences between the two promoters — Rahul Bhatia and Rakesh Gangwal – have instilled fresh fears of another airline making a harsh landing at a time when the Indian aviation sector is still dealing with the Jet Airways crisis.
Various media reports suggested that differences have cropped up among the two chief promoters over strategies and ambitions for the airline. In order to resolve the differences amicably, Rakesh Gangwal and Rahul Bhatia are also taking help from law firms J Sagar Associates and Khatian and Co., respectively. But these developments should not mean that the airline is in the mid of a full-blown crisis. The current situation at IndiGo could be a classic case of differences between promoters that could be sorted with legal help.
According to a media report that quoted a person intimately familiar with the matter, there are differences between the IndiGo founders, but they have nothing to do with the senior management roles, as being interpreted by various media reports. “Why should they have a problem with professionals who have built a successful world-class airline?” he asked, requesting not to be named.
The report rightly argues that if there were differences, none of the appointments at senior positions at IndiGo would have been cleared.
As regards to the involvement of law firms, Khaitan and Co and J Sagar Associates have not been hired singularly for resolving the dispute. Gangwal has hired Khaitan on a retainer at least 16 years ago, while J Sagar has represented Bhatia for around 30 years, said the person quoted above. “Of course, they have sought an opinion from their legal firms. They talk to lawyers regularly as they are on retainer.”
But then what exactly is the dispute all about? It is not a regular issue for an airline that has so far largely been unaffected by the persistent troubles of the aviation sector.
According to the report mentioned above, IndiGo has faced some setbacks recently such as the Pratt and Whitney engine issue and exits at the top level. The lure of expanding international operations, never its forte, and ordering bigger planes are also some of the newer challenges facing the airline. Bhatia and Gangwal could possibly be at loggerheads on any of these matters.
IndiGo’s CEO Ronojoy Dutta also on Thursday sought to reassure employees that the airline will continue to chart its growth strategy. “I want to assure you that the growth strategy of the airline remains unchanged and firmly in place, and the management is fully charged by the board to implement it,” Dutta wrote in an email to the employees. Let’s hope he is right.
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