Deccan Express targets $70 mn topline in first year

Deccan Express Logistics, the cargo venture being launched by G R Gopinath, is targetting a topline of $70 million in the first year of its operations. The operations, being commercially launched on May 18 with an Airbus A-310 freighter on the Hong Kong - Delhi - Mumbai - Chennai route, will be tightly coupled with ground logistics.

A spokesperson for the company said that while the launch will be on May 8th in New Delhi, the commercial launch will be on May 18th. “We have got one aircraft and we should be gradually adding on a couple of more aircraft in the ensuing months,” the spokesperson added.

The company over a two-year period is expected to operate 11 aircrafts.

Deccan Cargo will be pitching itself against established players like Blue Dart, Gati, TNT Express and First Flight in India’s domestic cargo and logistics market. “This market is witnessing rapid growth and if Deccan Express proves its potential, it might pose a stiff competition to established players in three years time,” an industry analyst detailed.

Deccan Express will be Gopinath’s third major venture after charter aviation and commercial domestic ventures. Gopinath sold the commercial aviation business Deccan Aviation to Vijay Mallya’s Kingfisher Airlines nearly two years ago.

According to Deccan Express, the Indian domestic express market is at a very early stage of its development. “Deliveries are not constant and we have got used to delays and excuses. There is no way to track what we send and the situation is worse in small towns. Deccan Express Logistics will create a hub and spoke distribution model in the express industry in India. Once operational, Deccan Express Logistics’ air and surface network will offer next day connectivity to over 85 per cent of the Indian businesses,” the company added.

Sources close to Deccan Express further indicates that the company is close to tying up $55 million funding from three players - Singapore Cargo, IBM Ventures and Intel Capital to kickstart the venture while Gopinath himself through Deccan Ventures is understood to be pitching in with another $25 million.

Industry sources indicate that Intel Capital has shown a definitive interest in investing $25 million in this venture. “A time bound proposal was submitted by Intel Capital which recently expired. Intel Capital has renewed that proposal,” sources detailed. In addition to Intel Capital, IBM Venture Capital which traditionally does not take equity exposures is understood to have shown interest in a small equity exposure to the tune of around $3 million in this venture which will riding heavily on technology adoption.

Sources close to Gopinath also detailed that Singapore Cargo is another player which will be the second largest investor after Intel Capital in this venture. Edelweiss Capital is running the mandate of securing investors for Deccan Cargo and is hoping that the enterprise valuation will be around $150 million.