Shares in the parent company of India’s largest airline IndiGo sank almost a fifth on Wednesday morning after a dispute between the carrier’s billionaire co-founders erupted in public.

Interglobe Aviation fell as much as 17 per cent in early trading, after it emerged on Tuesday night that Rakesh Gangwal was seeking the intervention of India’s capital markets regulator over allegations of poor governance.

In a letter to the regulator posted to the Bombay Stock Exchange, Mr Gangwal said that “various fundamental governance norms and laws are not being adhered to” at IndiGo, a budget carrier with more than 40 per cent market share in India, one of the world’s fastest-growing aviation markets.

Mr Gangwal, who holds a 37 per cent stake in the company, said that governance standards had “collapsed” at the airline and called on the regulator to take away the “unusual” controlling rights exercised by co-founder Rahul Bhatia, who holds a 38 per cent stake.

The shareholder agreement gives Mr Bhatia’s IGE Group the power to appoint three of the six directors, and the right to nominate and appoint the managing director, chief executive and president.

“Most of these rights are not in accordance with [Securities and Exchange Board of India] regulations,” said Mr Gangwal in the letter. “These unusual controlling rights seem to be the basis for the various violations of law and governance at IndiGo. The nation can ill-afford IndiGo to even falter.”

In a rebuttal letter, Mr Bhatia described Mr Gangwal’s allegations as “false, frivolous, and misleading”, arguing that it was an attempt to “dilute and diminish the controlling rights of the IGE Group”.

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Mr Bhatia said that Mr Gangwal had a “hurt ego” and was making “figleaf statements” about corporate governance to conceal his agenda of winning more control of the company.

IndiGo was founded in 2006 by Mr Gangwal, a US citizen who has worked for United Airlines, Air France and US Airways, and Mr Bhatia, an electrical engineer with a background in air transport management.

The pair have been locked in a bitter fight since early this year, after a management shake-up that involved bringing in international hires to oversee global growth. Analysts have linked the feud to the unusual shareholders agreement but at least one industry source has said the fight is solely about control.

“Mr Gangwal was instrumental in getting …long term deals from aircraft manufacturers, while Mr Bhatia was running the show in India,” said Santosh Hiredesai, aviation analyst at SBICap Securities.

“If this isn’t settled in time, it may hurt IndiGo’s growth aspiration. Plans towards going international in a big way, expansion strategies — those things might take a back seat.”

IndiGo invested heavily in new aircraft while keeping prices low, inflicting pain on full-service competitors Jet Airways, which collapsed in April, and Air India, the struggling state carrier.

The battle between the two founders comes as IndiGo is working to expand its international operations after the collapse of Jet, India’s oldest private carrier that was forced to stop operations after running out of cash.

Jet founder Naresh Goyal was stopped from leaving the country in May as authorities investigate the collapse of the airline.

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Additional reporting by Daniel Shane in Hong Kong

Via Financial Times