Aviation entrepreneur G.R. Gopinath, founder of the country’s largest low-fare airline Simplifly Deccan (erstwhile Air Deccan), has mandated Mumbai-based investment banking firm Edelweiss Capital Ltd to seek out private-equity investors for his new cargo airline.
Gopinath, who owns 100% of Deccan Cargo, plans to dilute up to 26% of his stake and eventually list the company to provide private equity investors an exit opportunity, said a person familiar with the development, asking not to be identified.
Deccan Cargo plans to invest $200 million (about Rs863 crore) over the next three years, the person said.
Infosys Technologies Ltd, India’s second largest software exporter, has won the mandate to design and implement technology that will allow Deccan Cargo to offer online “track and trace” facilities for customers, and help cut costs, this person also added.
Gopinath, now vice-chairman of Deccan Aviation Ltd after liquor baron Vijay Mallya’s Kingfisher Airlines Ltd took over the airline, has registered a new company named Deccan Cargo and Express Logistics Pvt. Ltd for executing the cargo airline venture.
Gopinath confirmed the appointment of Edelweiss Capital but didn’t provide further details.
He also said Deccan Cargo is in talks with all leading technology companies.
Calls and text messages to an Infosys Technology spokeswoman did not elicit any response.
“Capt. Gopinath is relying on IT infrastructure. He thinks IT will help him to provide innovation in his cargo venture apart from cutting down several operational costs,” the person mentioned earlier said.
Deccan Cargo plans to acquire 10 bigger dedicated cargo planes from Toulouse-based airplane maker Airbus SAS, he added.
A logistics expert said a dedicated cargo airline has business potential, but Deccan Cargo would succeed only if it has complete ground infrastructure to complement its wide-body Airbus planes.
“Logistics is a complex process involving various factors including movement, storage, distribution and re-distribution of cargo seamlessly. Therefore, merely having an airline network will not help Deccan Cargo,” said the expert, who didn’t want to be identified.
Setting up infrastructure at airports involves considerable investment and more players are entering the scene, the industry expert noted.
“Deccan Cargo will be an end-to-end logistics company,” said Gopinath. “The idea is to connect across the country and other parts of the world in future.”
Several other Indian companies are looking to tap the growing demand for movement of cargo by air. Domestic freight traffic increased to 423.43 tonne between April and December, up 8.1% from a year ago, according to Airports Authority of India, or AAI.
Jet Airways (India) Ltd and Kingfisher Airlines, India’stop two private airlines, intend to start dedicated cargo operations.
Bangalore-based Quikjet Cargo Airlines Pvt. Ltd, Hyderabad-based Flyington Freighters Ltd, Mumbai-based Avicore Aviation Pvt. Ltd and New Delhi-based Aryan Cargo Express Pvt. Ltd are also drawing up plans to enter themarket.
“However, these plans by passenger airlines seem unlikely as they are making huge losses in the backdrop of skyrocketing jet fuel prices,” said the same person mentioned earlier.
Source: Livemint