“I’m being towed by a fish and I’m the towing bitt. I could make the line fast. But then he could break it. I must hold him all I can and give him line when he must have it. Thank God he is travelling and not going down.”
What I will do if he decides to go down, I don’t know. What I’ll do if he sounds and dies I don’t know. But I’ll do something. There are plenty of things I can do.
- Old Man and the Sea,
Ernest Hemingway
As April drew to a close, Captain G.R. Gopinath, the intrepid entrepreneur, realised it was closing time. The aircraft of his company Deccan 360 were grounded. The trucks had stopped running. The IT centres and the service centres were shut down. The Rs. 110 crore that Gopinath raised from Reliance in April 2010 is gone, as is most of his other money. His biggest customers are fuming and many of his franchisees feel betrayed. His key executives with their salaries delayed for two months are demotivated.
Entrepreneurs know adversity. It is what makes their ilk different from the nine to six desk jockeys. Gopinath certainly has seen many tough times but this situation is not pretty. In less than 15 months of operations, two CEOs had left as has the head of sales. Sometime this week, he wants to launch his company in a different and smaller avatar. Yet, resumes from Deccan 360 employees have flooded the market. The much promised Nagpur hub has not taken off.
The company is said to owe Rs. 16 crore to its truckers. Reliance did not respond to a detailed questionnaire, but people close to Mukesh Ambani believe that the way things stand, he is in no mood to invest any more money in this venture.
Is Captain Gopinath unlucky this time around or were his plans unrealistic? There is no doubt that the Captain was aggressive. He had, after all, a thing or two to prove after he had to sell his company Air Deccan to Vijay Mallya. A non-compete agreement meant that he couldn’t start another airline. But his heart was in aviation. (We suspect it will always be that way because even now he is reported to be trying to expand his venture in the charter segment. But that story is for another day!). Despite several requests Gopinath did not speak to us. Till the time of writing the story, he was stationed in Delhi trying to get his charter business in to fifth gear.
New Dream
Gopinath wanted to build a logistics company that would revolutionise the industry. Sitting in his heritage house in Bangalore, in an interview given to us in October 2009, he spelled out his vision. It was grand and it involved planes. He wanted to connect 17 airports and 24 cities by three Airbus A310s and seven smaller ATR 42 turboprops.
According to him, the market opportunity was always there. An investor presentation made by Deccan 360 in April 2009 put the size of the logistics industry at $624 million in 2007, of which 60 percent (in revenue) came from air. Blue Dart was the only integrated logistics company in India with its fleet of seven aircraft. Gopinath’s aspiration was to offer a service better than Blue Dart and take away 20 percent share in the next five years. By the end of FY 2010 he said Deccan 360 would have revenues of $73.5 million. The reality is much more sobering. For the year ending July 2010 (for which results are available) the company had revenues of Rs. 43 crore (just over $9 million) and losses of Rs. 200 crore (around $44 million).
So what happened? To be fair to Gopinath, he did set out on a difficult task. The road to express logistics business is littered with failed ventures.
In 2009, as Gopinath was getting ready to launch Deccan 360, he had two options. One was to scale up gradually, start with surface transport, rent the belly of passenger aircraft of other airlines, and as more customers came on board, increase capacity by leasing out cargo planes. This was the conventional model used by players like Blue Dart. This approach was tried and tested. The downside is that it would take much longer. A bigger problem is that marquee customers, say Nokia or LG, would want an integrated solution. They would want to deal with just one vendor.
Go For Scale
It’s not clear if even those in Deccan 360 knew. “It was the case of the elephant and the six blind men. We had a highly capable team on the board, and they were very good in their respective areas. But they didn’t see the big picture, of how the entire system works,” says Kumar.
(This story appears in the 03 June, 2011 issue of Forbes India. To visit our Archives, click here.)
Customer service is bad in AP, booked a consignment to hi-tech city and it was not delivered for ages. When i kept calling the handling office they said it will be done today and that today didnt turn up for 3 days. Handling in-charge one Mr Sushil was going on giving me a false commitment and then was not taking my calls. This way i think no COMPANY will have success. Me myself coming from a service industry believe that giving good customer service will lead to success in Business.
on Jun 12, 2011Still the company can come up in a strong way if the operations and sales team change. As far as i know, been in the same field, i got to know that Deccan has taken non performers who have been taken out from different courier industries. Example - the major chunk came from BLUEDART. Capt and Team will never succeed in this business if they continue having this team of non performers.
on Jun 9, 2011As one who was in Gopi"s start up team in Air Deccan and had a chance of closely interacting, the difficulty with Captain is he refuses to see the realities of Indian Airports and constrains which brought the Deccan many hurdles. We could not create a Ryan AIr in India though the concept was the best. The same is the case in 360 also.
on Jun 4, 2011This industry is basically manpower oriented and good manpower can be the success. Secondly the operations in India are complex with different regularities. 360 should have concentrated on a couple of regions rather than pan India.
on May 29, 2011Capt Gopinath must concentrate or focus on areas not exploited by competitors only then can he succeed. He should get in touch with the Ministry of Defence and offer to fill the void in airlift to Leh Ladakh of defence supplies. Similar attempts should be made to airlift cargo to Afganistan and other trouble spots which would not be a preferred destination for other established players like DHL Blue Dart etc.
on May 26, 2011Not sure about all the data in the article. First of all, the investment came from Mukesh Ambani's Private Equity firm and not Reliance. Second, the funding was to the tune of Rs 500 crore not Rs 110 crore, with commitment to invest more at different valuations. Third, the head of Mukesh Ambani's PE Firm who sits on the board of the company continues to firmly bet on the company and further investments are coming in.
on May 24, 2011Dear Ashok thank you for your comment. According to the documents filed by Deccan 360 with the Registrar of Companies (ROC), the articles of association show that RIL invested in Deccan Aviation through its wholly owned subsidiary, Reliance Industrial Investments.
on May 26, 2011Thanks for the response Ashish. Yes, found that out after posting the comment. But I am fairly sure you're speculating on the quantum of investment. What is the source for that? Rs 110 crore was only the first tranche
on May 26, 2011Deccan 360, as I understand, offered 3 products- Express, Air package and Surface package, with common sales team of Franchisee partners, most of whom did not seem to have experience in these businesses. None of the other players in the industry except, Blue Dart have succeeded with this strategy. Even Blue Dart has built this product portfolio over a period of time, by inducting necessary product relevant skills and infrastructure. Deccan 360 can do the following. 1.Control Hub operations-surface and Air, directly. 2.Exit Express product completely and focus only on Air and Surface cargo products. 3.Have 2 product business groups, vertically upto the branch level for a better focus on Air and Surface products, separately. 4.Revamp Franchisee network, with experienced large number of smaller franchisees. The concept of Integrated service network is a great idea,but they failed to recognize them as different businesses with unique sales approaches.
on May 24, 20111) Dont they already have reliance account to get them good business? 2) They should get investments from other who have failed before and dont have power/ load to fly alone Firstflight/Gathi 3) Alternatively why cant FF/Gathi be their direct customer? (backend support)
on May 24, 2011Hi Sajeev. To answer your questions: 1. The idea initially was that Reliance would be a customer for them for logistics, one of the reasons Ambani did that deal. Reliance Retail did try them out but their rates were not comparable and also their service was bad so it didn't get to the second stage. 2. Companies like First Flight and Gati are better sticking to cheaper commercial airlines. The belly space rates are almost half of what Deccan would charge. Connectivity is not a problem. 3. Also, the reason why First Flight and Gati failed is that they didn't have enough customers in their kitty willing to pay a premium for air cargo. So it doesn't really make sense for them to invest in Deccan 360.
on May 24, 2011Honey, I Shrunk Deccan 360 and Survived! Thank you for this very well-written piece on Captain Gopinath. Captain Gopinath cannot and will NOT fade away. This Jonathan Livingston Seagull knows that "Sweet are the uses of adversity". The Aviator will "Simply Fly" Full Steam Ahead after some course correction and soar again to scale even greater heights.! http://business.in.com/article/zen-garden/g-r-gopinath-jonathan-livingston-seagull/12882/1 "Even before I realised, I had set up Deccan 360. I am a man who is rising and falling, and rising and falling, and rising again!" Like Neil Gaiman said: "Only the phoenix rises and does not descend. And everything changes. And nothing is truly lost."
on May 24, 2011