Deccan Aviation Ltd managing director Capt G R Gopinath is out in the market scouting for suitable investors, but the current state of his airline’s finances does not give him much time on hand.
BANGALORE: Deccan Aviation Ltd managing director Capt G R Gopinath is out in the market scouting for suitable investors, but the current state of his airline’s finances does not give him much time on hand.
According to industry insiders, with the networth (equity capital + cash reserves) of Gopinath’s budget airline Air Deccan eroding by the day, he has to act fast before it moves into the negative range. The country’s first low-cost airline’s networth has depleted considerably from Rs 224.13 crore during the 15 months ended June 30, 2006.
If industry sources are to be believed, it is down to approximately Rs 20 crore today and diminishing with each passing day. “It (networth) is not yet zero or negative, but is significantly low —around Rs 20 crore. Air Deccan will have to act quickly to get the funds in,” said an industry source.
Air Deccan spokesperson Vijaya Menon said the fund-raising process was on. She, however, could not comment beyond that.
The no-frill airline has already initiated talks with Reliance’s Anil Dhirubhai Ambani Group (ADAG) for offloading between 15-26% stake to raise Rs 300-400 crore ($75-100 million) for expansion. It is also in talks with some private-equity firms and overseas corporate investors.
On Tuesday, a section of the media reported that rival budget carrier SpiceJet Ltd was also interested in picking up a stake in Air Deccan.
SpiceJet Ltd director Ajay Singh, however, clarified; “On the face of it, we are quite satisfied by ourselves and haven’t considered it (picking up stake in Air Deccan) but should a proposal come to us, we will certainly look at it.”
While, like SpiceJet, there are suitors aplenty, the continuously slipping networth could endanger Air Deccan’s financials considerably.
“It may not affect the airline’s operation but will jeopardise its expansion plans,” said an industry source.
The budget carrier has chalked out massive expansion plans over the next few years. It plans to add 10 aircraft in 2007 and 14 in 2008 and is expecting 81 to be delivered over the next 6-7 years.
Over the next two years, it has marked an investment of Rs 200 crore that includes the construction of an A320 hangar in Chennai and an ATR hangar in Kolkata, a training centre and installation of simulators.
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