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Rediff.com  » Business » Deccan 360 into fire fighting; may raise Rs 200 cr

Deccan 360 into fire fighting; may raise Rs 200 cr

June 15, 2011 15:17 IST

MoneyDeccan 360 is not taking orders, as it claims it is re-aligning its services.

"We are re-engineering our services to serve our customers better. We have not been taking orders for the past couple of weeks and have been told not to book till further orders," said an executive.

He, however, added that they will be back in business soon, though he cannot commit himself to a time frame.

Behind this re-engineering process lies a story of execution which industry watchers feel could not match up to the vision charted by its famous and outspoken founder, G R Gopinath.

In the past decade, Gopinath had changed the canvas of the Indian civil aviation sector with his low-cost Deccan Aviation before selling it out to Kingfisher Airlines.

Senior officials at Deccan Aviation, however, maintained that operation was suspended because of a system upgrade.

"Operations were suspended for two weeks in May due to certain glitches. It had to be realigned with our business processes, and now we are back," the official said.

Bengaluru-based MindTree Ltd is managing the software development for the company. Also, Deccan 360 does not have its aircraft. It had three Airbus 310s, each with 38 tonnes capacity.

They were leased from Mauritius firm Veling.

While Veling said the professional understanding between them and Deccan 360 remains unchanged, the latter said they have returned the aircraft due to maintenance problems and are in discussions with vendors to procure four aircraft, more suited for their operations.

Efforts to reach Gopinath did not fructify.

According to a company spokesperson, he was busy in a meeting with investors.

According to senior aides close to Gopinath, they are left with no option but to raise equity from a new investor as the existing investor Reliance Industries is unlikely to pump in more equity to take the airline forward.

Last April, RIL had picked up a strategic 26 per cent stake along with the convertible debentures by investing Rs 115 crore (Rs 1.15 billion).

"Not a single CEO has stayed long enough to execute strategies on the ground. Let's see how Gopinath is able to wriggle out of this flux," an investment banker close to Reliance Industries told Business Standard.

Investment bankers close to Deccan 360 said Gopinath may be looking at raising Rs 200 crore (Rs 2 billion) through which RIL can get a possible exit and the company will get some fresh infusion.

Since kick-starting the venture, Gopinath is understood to have invested Rs 75 crore (Rs 750 million), RIL another Rs 115 crore (Rs 1.15 billion) and the company had raised a debt of Rs 500 crore (Rs 5 billion).

RIL, on its part, said they continue to be a financial investor in Deccan 360 and do not wish to comment on speculation.

The fact, that execution has not been up to the mark is pretty obvious in the numbers of Deccan 360.

On a top line of Rs 180 crore (Rs 1.8 billion) for the financial year 2010-11, the company is understood to have lost as much as Rs 120 crore (Rs 1.2 billion).

One of the reasons being cited is that it has not been able to get large customers who can bring in revenues of Rs 20-30 crore (Rs 200-300 million) each annually and has been relying on 2,000 small businesses, which is not high yielding and not consistent.

Gopinath, with his cargo venture, aimed to fill the latent gap of the much-needed efficient logistics network for a range of businesses.

While majority of air cargo provider connect India to the world, there are only a few pan-India service providers who can connect various cities and town in India.

"The business idea of Deccan 360 is an excellent one, but so far, they have not been able to execute to desired results," the investment banker said.

Deccan 360 officials, however, said they were aggressively tapping the e-commerce ventures to expand the business.

Currently it has two ATR-72s which fly Delhi-Mumbai and Mumbai-Chennai.

Each plane has a capacity of eight tonnes and are suitable for domestic operations. "We are looking at a daily capacity of 40 tonnes.

"E-commerce vendors and firms, which promote home shopping, require express delivery of goods and Deccan is trying to corner delivery business from this segment," the officials said.

Raghuvir Badrinath & Aneesh Phadnis in Bengaluru/Mumbai
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