ADAG vies for 33% stake in Gopinath's cargo airline

BANGALORE / MUMBAI: Anil Dhirubhai Ambani Group (ADAG) is once again warming up to aviation entrepreneur Capt GR Gopinath after losing out on acquiring Air Deccan last year. ADAG���s private equity arm, Reliance Equity Advisors, is holding talks to invest over $50 million (Rs 250 crore) in Gopinath���s new venture ��� Deccan Cargo ��� in return for a significant minority stake in the start-up airline, sources said.

Gopinath���s new dream of linking India���s distant hinterlands to the mainstream markets is expected to take off in January next year with fleet of Airbus aircrafts.

Others in the fray to pick up a slice of Deccan Cargo include US venture capital major New Enterprise Associates (NEA) and Intel Capital, which is seen working out a consortium play to make one of its rare investments outside technology space. Sources said the investment bank with fund-raising mandate from Gopinath has approached 3-4 suitors, including ADAG, and will probably narrow down to a potential suitor within two weeks.

Capt Gopinath could not be contacted at the time of going to press.

Sources said the potential investors could value the cargo airline at about $150 million eventhough valuation come under stress in difficult market conditions. This could see Gopinath diluting about 33% stake for raising over $50 million. It is believed that Deccan Cargo requires roughly $200 million in funding, and the ongoing plans to infuse $50 million is part of the overall financing strategy. Earlier, media reports have speculated that Gopinath may also leverage on his below 10% holding in Kingfisher Airlines to kick off the cargo start-up.



ADAG���s entry is interesting as it follows last year���s high-profile attempt to acquire low-cost airline Air Deccan, which was eventually sold to Vijay Mallya-led Kingfisher Airlines. Even after 16 months, industry observers are divided over Gopinath���s decision to sell stake to Kingfisher, which effectively erased Air Deccan brand that pioneered low-cost model in domestic skies.

ADAG is in the midst of raising $1 billion private equity fund with Anil Ambani as one of its anchor investors. Sources said Intel Capital���s interest was spurred by the airline���s heavy technology investments towards operational backbone.

Gopinath has already put in place an experienced management team ��� largely drawn from FedEx ��� at the helm of the cargo venture headquartered at Bangalore. The company has selected Nagpur as its hub from where it will service over 40 centres across the country with a fleet of 10 Airbus aircrafts.