InterGlobe Aviation - Indigo

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In a statement on Sunday, the IGE Group said it has from the inception of the airline “played the most significant role in nurturing Indi-Go to what it is today”.

In 2005-06, after the inception of the airline, the IGE Group had invested in fully paid up equity of Rs 30 crore and fully paid up nonconvertible preference shares (NCPS) of Rs 69 crore, while Gangwal “wanted to limit his financial risk to Rs 15 crore”, it said.

Also, when conversations with Airbus were on for its maiden mega order of 100 A320 planes, the founders undertook to invest in IndiGo an amount of “not less than” $50 million (then about Rs 200 crore). They further undertook to maintain that investment until the delivery of the last aircraft.

As “Gangwal was not going to take any further financial risk or obligation, IGE singly, though the undertaking to Airbus was a joint one, took the obligation to further invest up to Rs 110 crore in IndiGo so that taken together with the then existing investment of Rs 99 crore, the conditions placed by Airbus could be met”, said the statement.

The statement implied that IGE shouldered much of the early financial risk as the airline was being built.

“Gangwal was missing in action at that time and there were stages where he wanted to de-risk and pushed for the business to be sold. However, the IGE Group went ahead to continue to support the startup without in any way diluting Gangwal’s potential upside,” it said. “Kapil Bhatia and Rahul Bhatia extended personal loans to IndiGo and personal guarantees to the banks for diverse financing needs of IndiGo such as predelivery payments, aircraft acquisition, and working capital requirements.”

The statement also detailed the financial commitments by Bhatia and his father to the airline.

“Starting from financial year 2005-06 at a level of Rs 143 crore of personal guarantees by financial year 2009-10, the aggregate financial exposure of IGE, Kapil Bhatia and Rahul Bhatia was well over Rs 1,100 crore (consisting of equity, NCPS, and guarantees) while Gangwal was in safe harbour with equity exposure of less than Rs 15 crore; with no personal loans or guarantees or any other financial obligations for IndiGo,” the statement said, adding the risk ratio between the two founders was almost 80:1.

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Indigo Declares Highest profit ever - 1203Crs. :slight_smile:

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Indigo will be asking shareholder approval for woman director. One among those in the race is Indra Nooyi - former Pepsico CEO.

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Solid performance from Indigo. Perfectly seized the opportunity of Jet airways closure. Only thing to be sorted out is spat between promoters.

Disclosure: Invested and showing good profit in portfolio :slight_smile:

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The real trade spat between Indigo’s Gangwal and Bhatia:

  • Bhatia and his wife owns 36% in Indigo, whereas Gangwal owns 38%. However, in the Shareholder’s Agreement, Gangwal forfeit his control to Bhatia, and Bhatia has the control over the airline.

  • This is the problem. Even after having a majority stake in a company, you don’t have control over it.

  • Furthur more in the shareholder’s agreement, there is a clause which states that Bhatia has the authority to prohibit stake sale of Gangwal’s shares and vice-versa.

  • Also, Gangwal won’t get a good price on the stake as the buyer will get 38% shares of the company with no control.

  • Shareholders agreement will expire in October and won’t be renewed.

  • Company would then run according to the Articles of Association, where the clause of Bhatia being the minority stakeholder will have power of majority shareholder will continue to exist.

  • This is why Gangwal had to come public as he lost power in his own company.

  • Related party transactions are another area where Gangwal lost control to Bhatia, and more board seats went to Bhatia’s people.

  • This is why Gangwal was adamant on woman independent director.

Disclosure: Not invested but interested

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Annual report 2018-2019

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“I do not have the necessary infrastructure in India or need a PR agency to address these issues,” said Gangwal and added that he has set up a site to post information. " I believe this is an effective way to have my voice heard," he said. The site, not incidentally, is called GovernanceIndia.

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Man in a hurry… Trying to talk about corporate governance.

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Does anyone here feel Gangwal may edit by selling his stake ? Or Bhatia may buy his stake with the help of a fund.

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Thats what gangwal wanted to avoid… isnt it?

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This is just an observation:- I flew Indigo 3 times in the last 3 days, Bombay to Bangalore, Bangalore to Nagpur, Nagpur to Bombay. We can say that Bombay to Bangalore is a busy route. But on the other routes, the seats were 88% occupied. The number of people buying F&B for a one hour 10 minute flight is crazy, almost 35-45% of people.

Looks like business is booming.

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Astute observations :ok_hand: . As per their latest AR , the in-flight sale of products has jumped from 147cr to 395 crs. The 169% increase was long due as the growth in this dept was lagging the ASK growth. Since their international operations are booming the value & volume of in-flight sales would only go up.

Disclosure- InVested !

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Also, Indigo served instant food only with the exception of sandwiches. The addition to bottomline in this has to be excellent. For example Nestle has made a airline related noodles pack, which will hardly cost the airlines more than rs. 15 (I think it can go own to 10 depending on how much they can squeeze nestle) as they will buy this in bulk, listed MRP goes to Rs 200. Same with everything else.

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Mastercard credit card 20% off on F&B offer is running for a long time. I myself have bought more F&B onboard Indigo because of this offer. Also I feel now with higher prices in airports, the menu prices onboard look reasonable. Plus lot of corporate bookings.

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CAPA India, an aviation consulting company, has come up with the following points about our company -

  1. Weekingly International seats deployed by Indigo to/from India has increased by 43% in 3 months
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  2. Indigo has overtaken Airindia to become largest single player from India in terms of seats deployed accounting to 11.7% of total capacity.
  3. Indigo therefore is now undisputed leader in domestic & international markets in India
  4. Indian LCCs are expected to post record profits in FY20. Indigo alone is expected to post a profit of $400-500Mn.
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Has anyone gone for indigo AGM?

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