Mumbai: India’s low-cost pioneer, Gorur Ramaswamy Iyengar Gopinath, is a serial entrepreneur whose DNA dictates that he constantly throw himself into one kind of venture or another until something sticks.
As of late, however, Gopinath has been doing a lot more falling than rising. His latest venture, an express logistics company called Deccan 360—of which Mukesh Ambani’s Reliance Industries owns a 26% stake—has imploded in just under two years of operations, with its cargo operations shutting shop in May.
However, the news has gotten worse for Gopinath who is legendary for halving air-fares in India when he launched low-cost airline Air Deccan in the 1990s. The Directorate General of Civil Aviation last week put a spanner in Gopinath's plan to start an intra-state charter service in Gujarat with which he had hoped to connect tier-II and III towns with metros, by denying him permission to operate.
Realising that he was running out of options, Gopinath asked 600 of his employees a few weeks ago to look for jobs elsewhere or go on a long leave without pay. The company has cited business and funding constraints as a reason. Speculation is also rife that Reliance may buy out the cargo company but both Reliance and Deccan denied any such move.
How did things go into such a tailspin for a veteran of the airline business? While Gopinath didn’t respond to calls and emails, Shesh Kulkarni, CEO of Universal Freight Management (UFM), a cargo and logistics company, says the difference lay in the way Air Deccan and Deccan 360 functioned. “Air Deccan's growth was gradual. Planes were added and services expanded as revenue started trickling in,” he says.
Not so with Deccan 360. While there is nothing intrinsically wrong with Deccan 360’s business model, its costs grew faster than revenues because of Gopinath’s ambition to scale up quickly. The alternative route would have been to rent space on other aircraft and use road transport, but this would have grown the company at a far slower pace.
21/07/11 Aneesh Phadnis/Business Standard
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