Maverick entrepreneur Captain Gopinath’s logistics venture has been grounded because he can’t seem to get a handle on operations
“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.)