SEBI seeks to find out if IndiGo misled investors

SEBI seeks to find out if IndiGo misled investors

New Delhi, Jul 12: The markets regulator is probing whether the management of InterGlobe Aviation misled shareholders by downplaying the true extent of differences between the co-founders of India’s largest airline, two people with direct knowledge of the matter said.
The Securities and Exchange Board of India (SEBI) is examining whether the management deliberately misled shareholders or it was unaware of the true extent of the differences between co-founders Rakesh Gangwal and Rahul Bhatia, one of the two people cited above said on condition of anonymity.
The tussle between the two billionaire promoters of IndiGo over shareholder rights took a turn for the worse on July 8 when Gangwal wrote to SEBI alleging governance lapses at the airline.
Gangwal’s complaint to the regulator raised issues including related-party transactions (RPTs) entered into by the airline with Bhatia-controlled entities and the independence of the airline’s board. An email sent to IndiGo and SEBI went unanswered till press time.
These differences first came into public view on May 15 when the two promoters hired lawyers to reconcile their differences and take a relook at the contentious shareholder agreement which gives sweeping powers to Bhatia’s InterGlobe Enterprises Pvt.
On May 18, Ronojoy Dutta, Chief Executive of IndiGo, said in a press statement that there was no attempt by RG (Rakesh Gangwal) Group to renegotiate the shareholder agreement and Gangwal stood by the current agreement.
“This is contrary to what Gangwal has claimed in his complaint. There seems to be discord on the shareholder agreement that vests too many powers with one group of promoters,” the first person cited earlier said.
Mohit Saraf, senior partner at law firm L&L Partners, said if the management deliberately downplayed the discord and that led to a loss of shareholder wealth, then it’s a problem.
“Having said that, as a professional CEO, you could disclose only what information you have and if you believed material enough to be disclosed,” he added.
Separately, SEBI has sent a set of questions to the company on Gangwal’s letter and sought to know whether the related-party transactions were in compliance with the SEBI Act, and if there were any disclosure violations under listing norms, said the second person, also requesting anonymity.
IndiGo has to reply to the regulator’s queries by July 19.
“IndiGo’s compliance secretary on July 11 appeared before SEBI to provide certain clarifications,” said this person.
One of the major allegations Gangwal has levelled against InterGlobe Enterprises is that the related-party transactions violated the company’s code of governance.