InvestorQ : I am a shareholder in Interglobe Aviation and am a little worried about the management fight that is going on. How would it impact the performance?
Katherine Gonsalves made post

I am a shareholder in Interglobe Aviation and am a little worried about the management fight that is going on. How would it impact the performance?

Answer
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Rutuja Nigam answered.
11 months ago


Let us focus on the performance of Indigo Airlines (Interglobe Aviation) first. The company had put up a very good performance in the last couple of quarters and even this quarter is expected to be good when the board meets on October 24th to consider the results. Top line growth has been strong and low fuel prices will mean that margins are also protected. Also, with Jet out of the game, the pricing power is back with the airline companies and that has been positive for the airline companies. But the more important issue of discussion will not be the results but the management battle. Here is a background.

In fact, on the first of October, Inter Globe Enterprises and Bhatia (one of the key shareholding groups) had sought arbitration proceedings under the shareholders' agreement, which had been signed back in April 2015 and amended in September 2015. The agreement had then been executed between Bhatia's Inter Globe Enterprises, Mr. Gangwal, the Chinkerpoo Family Trust, Shobha Gangwal and Inter Globe Aviation. It me be noted that Gangwal family and Bhatia family are the two major shareholding groups of Interglobe Aviation. As of June 2019, Inter Globe Enterprises along with Bhatia and related individuals held 38.23% stake in the company while Gangwal and related entities owned 36.65% in the company making them almost equally powerful in the group ownership.

At the core of the battle has been that of the Gangwal family that they wanted a bigger say in the day to day affairs of the company, something which Bhatia had been handling all along. The differences came to the fore in July when Gangwal sought the intervention of SEBI over alleged corporate governance lapses at the company. The allegations were rejected by Bhatia group. Shareholders would prefer an early resolution to the problem, although it is unlikely to substantively impact the valuations of the company. As an investment it continues to be a solid on Indian aviation.