Captain GR Gopinath will begin operations of his new venture, Deccan Cargo & Express Logistics Pvt Ltd, on May 18. Gopinath, who has pioneered the low-cast carrier model with Air Deccan, which was acquired by Vijay Mallya’s Kingfisher Airlines Ltd, is now trying his hand at express logistics business. VCCircle looks at Gopinath’s new venture in detail.
Business Model – An express logistics venture, the company will operate under the brand Deccan 360, and aims to provide end-to-end logistic solutions to corporate customers. Deccan 360 will provide service to various industry verticals – pharmaceuticals, machinery, manufacturing, retail, electronics, textiles, banking, etc. The firm also provides technology solutions, which will help Deccan track all its shipments 24×7.
Differentiating Factor – While other cargo operators provide services to the main metros, Deccan 360 plans to reach out to smaller cities in the country. It plans to reach to 75 cities in India. The company will shorten the time span for cargo delivery by using the aerial route. Gopinath says that warehousing, logistics and transportation comprise around 28% of the total cost of manufacturing in India, which he plans to bring down by 12%.
Fund Raising – The initial investment is $25 million by Gopinath himself. The firm is looking to raise another $30 million and Singapore Cargo, IBM Ventures and Intel Capital are reported to be in the fray. Others like software billionaire Azim Premji and venture capital major NEA have also earlier expressed interest. The venture will need investment of Rs 300-400 crore upon reaching 75 cities.
Operational Model – Deccan 360 will operate on a hub-and -spoke model. This is a system of connections arranged like a chariot wheel, in which all traffic moves along spokes connected to the hub at the center. The hub will be city of Nagpur, located at center of India. The first service is Delhi-Mumbai-Chennai-Hong Kong, and Deccan 360 plans to add Dubai to that. The company also plans to have flights to Shanghai, China. This route comprises most of international cargo.
Deccan 360 has already reached agreements with Delhi, Mumbai and Hyderabad airports for hubs. Jude Fonseka, who has had 21-years of experience with FedEx, has been appointed as CEO of Deccan 360.
Market Size – The domestic express cargo business in India is $500 million. This as compared to China’s market of $5 billion with 100 dedicated cargo aircrafts. India has only seven cargo aircrafts.
Why his model is Disruptive – Gopinath is bringing his low-cost model to cargo business. Deccan 360 will franchise out the trucking and warehousing operations, cutting its expenditure and helping it scale rapidly. The company is also in talk with retailers understand their logistics need and plans to build cold-chains under franchisee model. It plans to have more than 100 franchises by end of the year.
Break-Even Plans, Revenues – Gopinath is looking at break-even in next 18 months. It’s targeting revenues of $50-70 million in the first year of operations.
Fleet – Starting with three Airbus and two ATRs. Plans to expand to five Airbus, four ATRs and a fleet of over 400-500 trucks in a year to connect to interiors of the country.
Competition – There are established firm in the market like DHL, Blue Dart, Gati, TNT Express and First Flight. There are also new entrants in the field which include New Delhi-based Aryan Cargo Express Pvt. Ltd, Hyderabad-based Flyington Freighters Ltd, Mumbai-based Avicore Aviation Pvt. Ltd and Bangalore-based Quikjet Cargo (backed by IL&FS Private Equity).
(Collated from various media sources)