The Hindu Business Line : ‘Air Deccan has found best partner in UB’

Bangalore, July 17 Days before the UB Group floats its open offer to acquire another 20 per cent stake in Deccan Aviation, both Mr Vijay Mallya and Mr G.R. Gopinath spent some quiet moments together at the latter’s farm house near Hassan, 200 km from Bangalore last weekend.

“He is straight forward to the ‘T’,” says Mr Gopinath, Executive Chairman of Deccan Aviation, which runs Air Deccan, about Mr Mallya.

The story goes that both the airline honchos took just 45 minutes to decide that the UB Group will buy 26 per cent stake in Deccan Aviation and that Mr Mallya even agreed to pay Rs 125-150 crore more than what Mr Gopinath hoped to get.

When ICICI Bank and Capital One were being roped in to finance Deccan Aviation, it took nearly 45 days of hard bargaining to put pen to paper and the 50-page document had clauses like “drag along rights,” which means that if the airline continues to make losses, the promoters would have to agree to sell their airline to whoever the financial institutions select as buyer.

Mr Gopinath is emphatic that he couldn’t have found a better partner than the UB Group.

“He (Mr Mallya) is a decent guy. Both of us agreed that the airline has to run professionally,” said Mr Gopinath.

Both of them have also agreed not to have veto powers and that if any decision needs to be taken, it would be left to the discretion of the board, which will have equal number of nominees from both the companies.

One of the immediate fallouts of the co-operation between Kingfisher Airlines and Air Deccan is that they were able to save as much as 40 per cent on the insurance premium when it came up for renewal recently.

“We are undertaking several new joint marketing initiatives to enhance both bottomline and topline,” says Mr Gopinath.

Air Deccan will release its set of print campaigns that talk about the joint marketing taken up by both the airlines.

Till last week, Kingfisher Airlines was running campaigns promoting both airlines.

As far as the open offer is concerned, airline analysts are a bit wary whether the UB Group will be able to mop up the entire 20 per cent.

Small investors tendering to the offer would attract short-term capital gains tax of 30 per cent, they added. Hence, they may not be too keen to tender their holdings to the UB group especially because the offer price is a mere Rs 10 more than the current market price of Rs 145.

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