Takeover of shares in IndiGo Airlines in India set to ease

IndiGo Airlines (6E, Delhi Int’l) parent company InterGlobe Aviation called its shareholders for an extraordinary general meeting on December 30 to vote on a proposal to amend the company’s Articles of Association (AOA) by removing restrictions on transfer of shares to them, he said in a Dec. 6 stock exchange document.

Conflicting co-founders Rakesh Gangwal and Rahul Bhatia, who together own 74.44% of the company, both requisitioned the meeting after being ordered to do so in a decision by the International Court of Arbitration in London in September ordering the removal of the AOA which restricts the transfer of shares.

Bhatia and his company InterGlobe Enterprises filed for international arbitration, and the award ordered Gangwal to pay them $ 50,000, but also cleared Gangwal’s counterclaim to remove transfer restrictions. The meeting will be the culmination of a legal battle that erupted in July 2019 when Gangwal alleged that the company’s corporate governance failed.

Gangwal approached the Delhi High Court in October, saying Bhatia had ignored his efforts to implement the London arbitration award, but the Indian court refused to intervene.

According to the latest disclosure, share transfer restrictions include the right of first refusal, accompanying rights, and rules regarding off-market transfers. The articles of association also prohibit the two shareholders from selling shares to a competitor or from effecting a change of control. Any acquisition of shares by either party triggering an open offer would also be prohibited.

Those articles and restrictions were set to expire in November 2019, four years after the company went public, but a special resolution Gangwal called to remove them failed because Bhatia blocked it. On December 30, however, the two businessmen requisitioned the EGM and the resolution to amend the statutes is therefore likely to be adopted. After that, both will be free to sell their shares to third parties.

Low cost airline IndiGo Airlines is by far the largest airline in India in terms of passengers carried and fleet size, with a domestic market share of 57%. According to advanced ch-aviation fleets module, it currently operates a fleet of 278 aircraft comprising 135 A320-200N (and 199 others to be delivered), sixty-two A320-200, forty-seven A321-200NX (and 349 others to be delivered), and thirty-four ATR72-600s (including 19 more to be delivered).

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