I have never had any issue with stake dilution, says GR Gopinath

GR Gopinath, pioneer of India’s low cost aviation, has done it again - got in a strong ally as “strategic investor” into his express logistic business Deccan360. The serial entrepreneur tells DNA making a difference and adding value to company are all that matters to him. Excerpts from the interview:

Why Reliance? Aren’t you once again inviting a stronger partner home, and perhaps may end up losing this company too, like you lost Air Deccan?
Air Deccan was a different story. The two companies (Kingfisher and Air Deccan) were merged. Here, I had been looking for private equity or strategic investors for a long time now because I want to create massive network (for express logistic) in the country.

Unless we have this network, it will be difficult to operate in this space. We have to establish the reach (for our services). That is why right from the start we had eight aircraft, 66 warehouses in 50 cities and huge network.

Mukesh Ambani has come in as a strategic investor. We share the same dream. Strategic investment (into Deccan360) will fuel my dream of creating a world class express logistic company.
He (Mukesh) believes in my dream. There are also lots of synergies (between RIL’s logistic arm Express Logistic and Deccan 360). We will tap into their resources like project management, IT capabilities and others.

They have the capability to scale up at lightning speed. I have never had an issue with dilution of stake. Even before Mallya (Kingfisher Airlines chairman Vijay Mallya) came in, I had minority stake in Air Deccan (26%). Even Narayan Murthy (Infosys Technologies chairman) has just 2-3% in the company (he founded). If you have to make a change or a difference, you have to be ready to dilute stake. People invested in Air Deccan too. Kingfisher and Air Deccan were merged. The situation was different (with Mallya). I was forced to step down.

Here, the strategic investment has given me the ability to scale up. I want to create a company that goes to every nook and corner of the country.

We will be able to do that with RIL investment. It really doesn’t matter what stake you have in the company. Steve Jobs (Apple CEO) also doesn’t have majority stake. So if you have to make a difference and create new markets, it really doesn’t matter what stake you have. You don’t build a company by having a controlling it but doing what is good for the company.

You can sell your stake and put the money into a bank or you can bring the money into the company through investors. What is more important is - are you making a difference or is your move game changing?

I may need more money. They (RIL) can bring in more money or I may stop taking money. It all depends on how the market unfolds, competition and a host of other factors. The whole idea is to create a world scale and whatever it takes (for that), I will do it.
In the case of Air Deccan, I could have gone the GoAir way and kept on going. Not that they (GoAir) are not doing the right thing but I wanted to create scale.

Is there a realisation, the cargo game is too big for you to be fighting alone with all the players entering?
Nobody has entered. Over the last two years. I have been saying I want to raise money but the market collapsed.

So I decided do it myself (pump money into the logistic business). They (RIL) will bring in value for my company.

When you started Deccan360 — which is right during the time you were chafing about losing Air Deccan — your mindset was different, you want to do a Deccan in Cargo, this time without a big brother as partner. What made you change your mind?
I incubated Deccan360 much before Kingfisher (sale of stake to Mallya) happened. I felt there is a need for it in India. Nothing has changed.

Mukesh Ambani and Mallya are known to be pretty close. Does that mean down the line Deccan 360 and Kingfisher Xpress may think of a dalliance? So, we have another of your ventures landing with Mallya sometime?
Mallya’s business is very different.

How big is the cargo game in India for Reliance to be interested? Has it got to do with the business itself or their retailing chain interests?
In America, just express logistic business (not including the entire logistic business) is $57 billion, in Europe it is $36 billion, in China $6.5 billion while it is just one-tenth of that (China’s market size) in India at $600 million. Whatever is there is between Blue Dart Express Ltd — owned by DHL — FedEx and UPS.

These guys are looking at connecting India to other countries. My focus is India. I want to penetrate express logistic services to deep interiors of the country.

There is massive manufacturing activity taking place in the country that will require linkages to different markets. Our services will get take products from manufacturing plants to the shelves across the country.

Will your business be eventually integrated into Reliance logistic arm?
Express Logistic (RIL’s logistic arm) is very different and has a different kind of specialisation. They (Deccan360 and Express Logistic) have a lot synergy but are as different as chalk and cheese.

Will the Deccan360 brand continue to exist or will it change with RIL’s entry? Will Mukesh Ambani bring in his representatives on the board of the Deccan360? How have ensured you don’t lose control of your company?
The brand will not change. They (RIL) will bring in capital but I still own the company. Mukesh Ambani will have two representatives on board while we will have three.