Mumbai: The new air cargo and logistics venture promoted by low-cost airlines pioneer G.R. Gopinath has begun to work more closely with Reliance Industries Ltd (RIL), less than three months after India’s largest private sector firm bought a stake in it.
Deccan 360 will open kiosks in at least 350 outlets of Reliance Retail Ltd, the retailing arm of RIL, within the next three months. RIL will also help Deccan 360 build a central warehouse in Nagpur and develop the technology infrastructure that is crucial for supply chain and logistics companies.
Deccan 360 is the brand owned by Deccan Cargo and Express Logistics Pvt. Ltd, the new Gopinath venture.
“Reliance Industries and Deccan 360 will jointly work to derive synergies in IT automation, project management and retail network,” Gopinath said in an interview. The two companies have not revealed the extent of the RIL investment though Gopinath terms it a “strategic investment”.
Analysts say that both companies will benefit from the synergies.
“Reliance Industries will get access to the huge domestic air cargo network of Deccan 360 while the airline would get access to a captive client base, including Reliance Industries and Reliance Retail. Deccan 360 will also get a much-needed fund infusion to scale up across the country,” said Aswatha Nagendra, till recently country manager with supply chain consultancy firm Logistics Consulting Asia.
RIL declined to comment for this story.
Meanwhile, Gopinath has begun putting his senior team in place.
He has hired Thomas Matthew, former managing director of India at US-based United Parcel Service Inc. (UPS), to head Deccan 360 as president. Matthew will be responsible for daily operations at the firm.
According to the UPS website, Matthew is currently with the UPS Asia Pacific Strategy team based in Malaysia. He will join Deccan 360 in July, said Gopinath.
Deccan 360 has also appointed former SriLankan Airlines chief executive officer H.L. Rikhye as chief operating officer (aviation), to look after charter operations, while Vikram Mansukhani, UPS India’s former express division head, has come in as chief operating officer for the small parcel division.
Before getting RIL on board, Deccan 360 had let go expatriate employees in late April, including Jude E. Fonseka, a Sri Lankan settled in Australia.
“Though we are yet to finalize the areas of cooperation (with RIL), we are all set to scale up our network. My idea is to have presence in all taluka headquarters of the country in the next five years. We want to be a ubiquitous end-to-end cargo company,” Gopinath said.
Asked whether Deccan 360 would be having captive clients such as Reliance Industries and Reliance Retail, Gopinath said both sides are yet to finalize such details.
Reliance Retail has a presence in at least 85 cities across 14 states in India, with at least 1,000 stores.
Gopinath said the project management division of RIL is helping him set up a huge warehouse at Nagpur to create a multi-modal logistics hub that will aggregate, distribute and redistribute cargo to and from international and domestic locations.
“We are now finalizing an international architect to build the facility,” he said.
Some industry insiders treat the partnership with scepticism.
“Logistics is not a business where Reliance Industries is in. It has no expertise in this sector, unlike in petroleum refining. The business model of Deccan 360 itself is faulty as rivals such as Blue Dart Express Ltd and First Flight Couriers Ltd have 1,200 and 850 owned offices respectively. Deccan is operating purely on a franchisee model,” said a senior executive at a leading freight forwarding company. He did not want to be identified.
Gopinath disagreed. He pointed out that a cargo airline is just one part of his business plan. The major portion will come from handling small parcels and documents through a surface transport network.
“My idea is not take away the market of Blue Dart. While Blue Dart is trying to link India to the rest of the world, I am trying to link India to India and then the rest of the world. We have land and buildings at 17 airports and 1,000 trucks running under the Deccan 360 brand,” Gopinath said.
He said his logistics plan will have a link to rail, roads, ports, airports and special economic zones.
“When I met Mukesh Ambani, he said he was not interested in creating world class companies, but in setting benchmarks for such companies. That is our aim,” Gopinath added.