The Indian air-cargo sector received a major boost, with RIL picking up a stake in Deccan 360, a start-up cargo venture promoted by Captain G.R. Gopinath. The investment in the freighter airline is done through a wholly-owned subsidiary of RIL. The deal amount is not undisclosed.
However, the Reliance Group Company is said to have acquired a stake of about 26-27% for a consideration of around Rs114 crore. On achieving certain milestones based on volumes and profitability, the stake could be scaled up to 40%. The Deccan 360 board will have two directors from RIL and three from Deccan Captain Gopinath said that he sees RIL as a “long-term strategic partner”. He said that Deccan 360 will tap into RIL’s resources in information technology, retail and expertise in building huge infrastructure.
Mukesh Ambani believes that collaboration with Deccan 360 will see a transformation in the logistics domain in India. Deccan 360 operates on a hub-and-spoke model, with six freighter aircraft (three ATRs and three Airbus 310) and expects to take delivery of two more ATR freighters by the end of April. The airline covers 15 airports providing overnight services to 50 cities with over 60 franchisees nationwide.
The company is in the process of developing a central hub in Nagpur on 50 acres at Multimodal International Hub Airport at Nagpur (MIHAN), which is expected to commence operations by end-2010. We maintain a BUY on RIL, with a target price of Rs1,260.
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