Anil Dhirubhai Ambani Group (ADAG) is once again warming up to aviation entrepreneur Capt GR Gopinath after losing out on acquiring Air Deccan last year. ADAG’s private equity arm,
Reliance Equity Advisors, is holding talks to invest over $50 million (Rs 250 crore) in Gopinath’s new venture — Deccan Cargo — in return for a significant minority stake in the start-up airline, sources said.
Gopinath’s new dream of linking India’s distant hinterlands to the mainstream markets is expected to take off in January next year with fleet of Airbus aircrafts.
Others in the fray to pick up a slice of Deccan Cargo include US venture capital major New Enterprise Associates (NEA) and Intel Capital, which is seen working out a consortium play to make one of its rare investments outside technology space. Sources said the investment bank with fund-raising mandate from Gopinath has approached 3-4 suitors, including ADAG, and will probably narrow down to a potential suitor within two weeks.
Capt Gopinath could not be contacted at the time of going to press.
Sources said the potential investors could value the cargo airline at about $150 million eventhough valuation come under stress in difficult market conditions. This could see Gopinath diluting about 33% stake for raising over $50 million. It is believed that Deccan Cargo requires roughly $200 million in funding, and the ongoing plans to infuse $50 million is part of the overall financing strategy. Earlier, media reports have speculated that Gopinath may also leverage on his below 10% holding in Kingfisher Airlines to kick off the cargo start-up.
ADAG’s entry is interesting as it follows last year’s high-profile attempt to acquire low-cost airline Air Deccan, which was eventually sold to Vijay Mallya-led Kingfisher Airlines. Even after 16 months, industry observers are divided over Gopinath’s decision to sell stake to Kingfisher, which effectively erased Air Deccan brand that pioneered low-cost model in domestic skies.
ADAG is in the midst of raising $1 billion private equity fund with Anil Ambani as one of its anchor investors. Sources said Intel Capital’s interest was spurred by the airline’s heavy technology investments towards operational backbone.
Gopinath has already put in place an experienced management team — largely drawn from FedEx — at the helm of the cargo venture headquartered at Bangalore. The company has selected Nagpur as its hub from where it will service over 40 centres across the country with a fleet of 10 Airbus aircrafts.
Source: Economic Times