The Hindu Business Line : Deccan Aviation IPO on May 18, price band Rs 150-175

Expansion plans
Pilot training centre to be set up in Bangalore at Rs 65.6 crore
Hangar facility for basic and medium-level maintenance checks in Chennai at Rs 40 crore

TAKE-OFF: Capt. Gopinath, MD, Deccan Aviation Ltd, with Mr Warwick Brady, Chief Operating Officer, at a press conference to announce the company's public issue in Mumbai on Thursday. - Paul Noronha

Mumbai , May 11

Deccan Aviation Ltd, operating the low-cost carrier Air Deccan, will enter the capital market on May 18 with an initial public offer of 2.45 crore equity shares of nominal value of Rs 10 each through a 100 per cent book building process. The price band for the issue has been fixed at Rs 150-175. The issue closes on May 23.

The company proposes to raise Rs 368.19 crore at the lower end of the price band and Rs 429.55 crore at the higher end. The issue would constitute 25 per cent of the fully diluted, post-issue, paid-up capital of the company.

The proceeds from the issue will be utilised to part-finance its expansion programme, including setting up of a pilot training centre in Bangalore at a cost of Rs 65.6 crore, a hangar facility for basic and medium-level maintenance checks in Chennai at Rs 40 crore, and market development initiatives and debt repayment of Rs 132.7 crore.

The company's present fleet comprises 18 ATR turboprop aircraft and 11 Airbus A320 jet aircrafts, all of which have a single-class passenger seat layout. The company has orders in place for 96 aircrafts, which are scheduled to be delivered by 2012. The proposed acquisition in 2007 is 19 and another 13 in 2008, including through lease and hire purchase.

Capt. G.R. Gopinath, the company's Managing Director, said that in order to help translate its low-fare strategy into positive results, the company has taken several steps to reduce the cost of operation.

Cutting costs

Simplifying operations can remove layers of costs, he said, adding that, for example, by arranging flight schedules so that an aircraft ends each crew shift at the same airport where it started that crew shift, the company could eliminate the cost of putting crews up overnight.

Air Deccan also seeks to manage costs through sales and barter exchanges for advertisement space, including internal aircraft spaces such as storage bins, headrests, tray tables and baggage tags, and outside surfaces of the aircraft. "A team is currently working on it. We aim to notch up 3-5 per cent of our revenue through such ancillary streams," Mr Warwick Brady, Chief Operating Officer, said

He added that the company intended to become profitable in 18-24 months.

Admitting that there was a pilot shortage in India, Capt. Gopinath said, "There are hundreds of pilots without jobs in the US and Australia. We can do some reverse body-shopping. We will be needing some 1,000 pilots within the next four to five years."