IndiGo may excel in Q1 earnings, but attention shifts to board meet amid founders rift

Analysts expect IndiGo to report one of its best quarterly performances when the country's largest airline releases its earnings performance for the first three months of financial year 2019-20.

But then, few will be interested in IndiGo's revenue or EBITDA margin.

Instead, all eyes are ears are pointed towards the board meeting where the two founders -- Rahul Bhatia and Rakesh Gangwal -- are expected to face off for the first time since they made their differences official earlier this month.

Gangwal has alleged that Bhatia is using the airline to benefit his privately held InterGlobe Enterprises, and is taking undue advantage of the shareholders agreement that favours the latter.

Bhatia, on the other hand, countered that the related party transactions make up for less than a percent of IndiGo's revenue, and that Gangwal's ego is hurt because of this $20 billion engine deal with CFM.

Also read: EY report finds IndiGo dealings compliant with corporate norms

Nevertheless, Gangwal has been successful in catching the attention of market regulator SEBI and even the Prime Minister's Office is said to have taken note.

In fact, July 19 is also the deadline for InterGlobe Enterprises to write to SEBI in response of Gangwal's allegations on corporate governance.

So what have the two founders - whose friendship-turned-partnership had seen IndiGo corner almost half of the domestic aviation space - differed on?

These are the main charges of Gangwal, who infamously said a 'pan ki dukaan' has better governance than IndiGo:

- InterGlobe has several related-party transactions with IndiGo, and these haven't been at an arm's length

- Bhatia, through the shareholders agreement between the two, has muscled his way into making appointments of directors and senior leadership, including the CEO

- The Board, at the behest of Bhatia, had turned down his request to convene an extra-ordinary general meeting (EGM) to discuss related-party transactions and changing the provisions

- An independent inquiry into the transactions, as was mandated by the board, haven't been shared or taken cognizance of

Bhatia has been equal in contending these claims, which he said are 'much ado about nothing.' He said:

- The related-party transactions are less than a percent of IndiGo's topline

- InterGlobe and the Bhatia family has taken more risks in building the airline

- Gangwal even had proposed selling the airline

- An internal committee had been set up to suggest changes in the process of allowing related-party transactions. But Gangwal scuttled it.

The airline is expected to announce the results by about 4 pm on July 19 and an investor conference call will follow at 5 pm.

The company's stock may have recovered this week after the slump of 17 percent when the founders traded charges. Now, the market will be looking for clues from the July 19th board meeting to understand its gauge its trajectory in coming weeks.

Original Source: https://www.moneycontrol.com/news/business/companies/indigo-may-excel-in-q1-earnings-but-attention-shifts-to-board-meet-amid-founders-rift-4222711.html