IndiGo promoters’ spat: Rahul Bhatia counters Rakesh Gangwal’s charge

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NEW DELHI: Rahul Bhatia’s InterGlobe Enterprises (IGE) on Wednesday countered IndiGo co-founder Rakesh Gangwal’s charges about the airline entering into related party transactions (RPTs) with IGE Group companies. The Bhatia Group said these RPTs were disclosed at the time of IPO in 2015 and “materiality of the transactions for (IndiGo) is not significant as… it is only 0.53% of (IndiGo’s) consolidated turnover for FY 2018-19.”

A statement by IGE said: “For several decades, before IGAL (InterGlobe Aviation Ltd or IndiGo) was founded, IGE and its founders (Rahul Bhatia and family) have been involved in diverse areas of aviation industry including provision of services to the aviation industry at large. This connect with, and experience in, the aviation sector was the fundamental reason for IGE to think about setting up an airline…. The IGE Group has nurtured and supported IGAL through its formative and expansion years by making available these services.”

On Tuesday, Gangwal had written to Sebi to complain, among other things, about IndiGo RPTs with IGE. “I hadn’t contemplated that over the years, Bhatia would start building an ecosystem of other companies that would enter into dozens of related party transactions with IndiGo. We are not against RPTs as long as proper checks and balances exist and such RPTs are in the best interest of the company. Beyond just questionable RPTs, various fundamental governance norms and laws are not being adhered to…” Gangwal had complained.

IndiGo promoters’ spat out in open: Even ‘paan ki dukaan’ would’ve run better, says Rakesh Gangwal

Differences between the promoters of the country’s largest airline IndiGo came into public on Tuesday with Rakesh Gangwal alleging serious governance lapses by co-founder Rahul Bhatia who had earlier termed his demands as unreasonable.

Replying to these, IGE on Wednesday said as of now RPTs exist in four areas — real estate leased to IGAL; simulator training facilities; general sales agents (GSAs for limited foreign markets only) and crew accommodation at Accor Hotels.

The total value of RPTs in these four areas with IndiGo was Rs 150.1 crore in FY 2018-19, representing 0.53% of IndiGo’s consolidated revenue. And about Rs 119 crore in FY 2017-18, representing 0.5% of IndiGo’s consolidated turnover.

On the real estate RPT, IGE said its “group entities have leased/licensed diverse office spaces to IGAL… these arrangements are long term – generally ranging from five to nine years. The rentals benchmarked to market rents prevailing at the time. Several of the terms and conditions have been more favourable to IGAL than market practice – for example, for leases executed before 2019, there is no (or lesser) security deposit; no lock-in period; favourable termination provisions; lower rent escalation; free signage; stamp duty and registration charges equally borne between lessor and lessee (normally entirely borne by the lessee).”

On simulator training facility RPT, IGE said: “In 2011, IGAL with a fleet size of 39 aircraft, placed an additional order for 180 aircraft. At that time, there was no single facility in India and south Asia that could cater to IGAL’s growing pilot training requirements.” To have a stay supply of home-trained pilots, IGE says it started this facility and “IGAL has always been provided with more favourable terms as compared to any other customer.”

Regarding GSA, it says: “IGE group has been and continues to be one of the leading GSA for several airlines. In 2006, IGAL appointed IGE as GSA for domestic cargo and domestic passengers. In 2015, when the domestic passenger GSA arrangement came up for renewal, IGAL decided not to renew it. IGE accepted the decision. In 2016, IGAL terminated the domestic passenger GSA arrangement arbitrarily. The decision was accepted by IGE. Currently, the surviving GSA arrangement is for limited foreign markets and is on an arms’ length basis.”

And finally on crew accommodation, IGE says: “IGAL has a significant requirement of hotel accommodation for its crew as part of its normal course of business. IGE, which has interest in the hotel business in joint venture with Accor hotels – under which Ibis and Novotel hotels are owned/operated in India.… Currently, Accor hotel provides just about 8% of the overall accommodation cost of IGAL (worldwide) while the rest of 92% is catered by other hotel chains for the FY 2018-19.”



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