IndiGo shares fall over 4% as co-founder Rakesh Gangwal offloads ₹2,000 cr worth stake

• Rakesh Gangwal’s stake sale comes six months after the co-founder resigned from the airline’s board of directors.
• Gangwal will pare down his stake in IndiGo further over the next five years.
• Post the stake sale, Gangwal’s holding will be down to 33.81%, while Rakesh Bhatia, the other co-founder, will continue to hold 37.8% of the airline.

Shares of IndiGo fell by over 4% in early trade today as co-founder Rakesh Gangwal decided to offload shares worth ₹2,000 crore ($250 million). Gangwal’s decision to reduce his stake in India’s largest airline comes six months after he resigned from the company’s board of directors.

The block deal has a floor price of ₹1,850 per share (discount of 6.4% to yesterday’s closing price), and will involve the sale of 10.8 million shares.

As of now, Rakesh Gangwal and family own a 36.61% stake in IndiGo, while Rahul Bhatia, the other co-founder, owns a 37.8% stake. After Gangwal’s sale, his stake will be down to 33.81%.

Currently, Gangwal’s stake is worth ₹27,900 crore, while Bhatia’s stake is worth ₹28,800 crore.

More stake sales down the road

The stock will remain under pressure as Gangwal will continue to offload stakes from time to time. Gangwal has a 5-year plan to pare his stake in IndiGo. “My current intention is to slowly reduce my equity stake in the company over the next five-plus years,” Gangwal said in a statement filed with the exchanges earlier this year.

Gangwal justified his resignation from the board of directors by saying it is to avoid conflict of interest since he also plans to sell his stake in the company gradually over the next five or so years. However, he has given himself an out saying that he could become a director once again in the future.

Gangwal and Bhatia haven’t been the best of friends for a while now

Despite being co-founders, Gangwal and Bhatia have had a very public spat for a few years now, dating back to 2019 when Gangwal wrote a letter to the Prime Minister’s office and market regulator SEBI, alleging “questionable related party transactions” between InterGlobe Aviation and Bhatia group firms.

Gangwal also raised issues of corporate governance – all of which Bhatia denied.

Later on, Gangwal approached the London Court of International Arbitration to remove a clause that prevented the promoters from selling their holdings. He won the arbitration and with IndiGo’s articles of association amended to remove this clause, he is beginning to offload his shares.

While Gangwal’s primary issue was with the deals that IndiGo entered into with Bhatia-owned company, InterGlobe Enterprises (IGE) and other group entities; he also said that he had little power when it came to running the affairs of the airline.

According to agreements entered into between IndiGo (InterGlobe Aviation) and Bhatia’s IGE, Gangwal could name only one director to the airline’s board, while Bhatia could name five, and also appoint the managing director, CEO and president.

Now with Gangwal beginning to pare his stake in IndiGo, it seems like the relationship between him and his other co-founder, Bhatia, is beyond repair.

$INDIGO.NSE I will be buyer even around 1900 as benefits of falling crude will reflect in trend of share Chart looks bullish for swing trade target of 2375 / 3480 With keeping stop loss around 1865 levels.

— (@Swapnilkommawar) September 08, 2022

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