A person close to IGE and Bhatia said co-promoter Rakesh Gangwal’s statement about the existence of the complaints was merely a “smokescreen” to cover his “larger game plan” for the control of the airline, which currently vests with the IGE group.
“You are missing the forest for the trees. The real issue is about the controlling rights of the company,” said the person, when asked to clarify on the allegations over corporate governance raised by Gangwal.
Gangwal had flagged transactions between IndiGo and IGE for the airline’s leased headquarter office space in Gurugram, a simulator facility for pilots and also the use of Accor hotels in India for pilots and crew.
The person close to Bhatia and IGE countered these allegations, saying that they had proposed an audit of all these transactions by one of the Big Four audit firms. However, Gangwal denied it on the grounds that they did not have the wherewithal to conduct such an audit, he said.
“The audit was conducted by EY only after chairman M Damodaran wanted it to be done. The audit did not find any problems with the RPTs (related-party transactions) but flagged some minor procedural issues,” said the person.
The Gangwal camp has also alleged that the rent of the building that houses IndiGo’s headquarters, which is leased out by IGE, had come down by about 25% after the airline company called bids to assess market rates.
IGE did not deny the reduction in rent but said the rate came down because real estate prices had corrected during the years.
“IndiGo was always free to move out of the building, if they so felt that the rates are high. Also, IGE has about a million square feet of space in that area and IndiGo uses only 70,000 square feet of it,” said the person.
He said the allegation over the use of simulator also needed to be looked at from the perspective of its benefits to IndiGo.
“The simulator training centre offers its services to IndiGo at rates that are much more competitive than other carriers, fetching benefits for the airline,” said the person.
Gangwal’s camp had alleged that the transaction with the simulator company was extended despite his raising concerns over a few issues.
The allegation of IndiGo crew staying in Accor Hotels, which in India is operated in partnership with IGE, has also been denied by the IGE group.
“Of the total IndiGo’s hotel expenditure, only 8% goes to Accor Hotels and the rest goes to other hotel chains. Also, of the total Accor’s revenue in India, only about 3% comes from IndiGo. All the hotel deals are through competitive bidding,” said the person.
When approached, Gangwal did not comment on any of the issues.
Gangwal, on July 8, wrote to the Securities and Exchange Board of India, seeking its intervention to address what he termed as corporate governance issues at IndiGo.
He had raised concerns about certain related-party transactions and corporate governance rules, including of the company not having a woman independent member on the board.
Agencies including Sebi are looking into the complaints raised in the letter.