This and the other conditions—per-share price, an independent board of directors, and an immediate payment of Rs200 crore—were hammered out in a 45-minute phone conversation just three days before Gopinath would have closed a private equity placement deal with another player.
The board itself is a 12-member balancing act, three nominated by United Breweries (UB), three by the original promoters, which includes Gopinath and two of his close friends, and the remaining six independents agreed upon by both UB and the original promoters.
But the arrangement is already beginning to chafe. Gopinath is tired of repeatedly answering the same question: Who is really running the show? Still, at an aviation conference in Mumbai, Mallya was asked about future plans for Deccan and Kingfisher.
“I need to check with my new employer,” joked Mallya alluding to his formal title of deputy chairman.
Mallya, through a spokesperson, declined to comment because his company is in a government-mandated silent period as it engages in an open offer to buy another 20% of Deccan Aviation’s shares from the open market, which it is required to offer to do under stock market regulations.
It is not yet clear how many individual shareholders will take him up on the offer to buy Deccan Aviation’s long-underperforming stock, which closed Tuesday trades at Rs141.55, close to where it leaped to after Kingfisher announced its acquisition of a stake. That price is just below its initial public offer price of Rs148, and UB’s offer to buy the shares at Rs155 would result in a slight profit for any long-term investors who didn’t bail out when the price peaked at Rs159.05 in January.
But even with a 26% stake, Mallya is the biggest shareholder and sees himself as more than just a strategic investor. When a reporter for Fortune magazine asked him whether he would be in charge of Deccan Aviation, his answer was uncharacteristically succinct.
“With a majority stake, that’s pretty inevitable, isn’t it?” he is quoted as saying.
One of the most controversial ideas being floated, according to the Deccan senior official, is the possibility of dividing the two airlines fleets into Airbus jets and ATR turbo-props.
The turbo-props, for both Deccan and Kingfisher, fly to smaller non-metros, and have been consistently profitable, because there is little price competition on those routes. The Airbus A320s that Deccan flies on major metro routes, and the varied Airbus airplanes that Kingfisher deploys on the same, have bled money since both airlines started. Taking Deccan’s A320s and converting them into the lush, full-service planes that Kingfisher has used to wrest market share from Jet Airways (India) Ltd would take Deccan out of the price equation on the metro routes. That means everybody could start to charge more, instead of racing to match Deccan’s low, loss-inducing prices.
That proposal, which is still in its initial stages but popular among Kingfisher executives, would reduce Deccan to a bit player in India’s aviation scene, rather than what Gopinath had planned as its inevitable destiny: India’s biggest airline, transporting a billion people a year.