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FOREIGN DEFENCE MAJORS ENTER INDIAN MARKET THROUGH JVs

FOREIGN DEFENCE MAJORS ENTER INDIAN MARKET THROUGH JVs
By Bulbul Singh

27 Jun 07. Indian private sector majors plan restructuring to concentrate on the defence market. Major private sector defence major Tata Power and Larsen & Toubro [L&T] plan separate divisions on defence and have already ties up with world defence majors. While L&T has tied up with EADS to bid for EW projects, Tata Power has tied up with Rafael of Israel and Raytheon of United States. Another private sector company, Rolta India Ltd. has gone ahead and made a subsidiary with Thales of France.

The private sector defence companies are preparing for a large share of the defence market as the Indian government is planning to give special concessions to the private sector defence companies. India remains one of the top importers of weapons and equipment in the world after China, and it is estimated that in the next five years weapons and equipment worth more than $60 to 70bn will be purchased by the defence forces from overseas and domestic sources.

Tata Power has already tied up with Raytheon of United States to bid for Electronic and aviation programs in the Indian market, said a senior company executive. Tata Power has also tied up with Rafael Armament Development Authority Ltd to bid for defence systems for the Indian army, which include anti-aircraft weapon systems.

The Tatas are looking at modernization of the Indian Army’s artillery systems which date back to the Soviet era, said the Tata Power executive.
Raytheon which has a tie up Tata Power is interested in helping Tata Power to replace and upgrade Russian armament with the Indian defence forces, which are obsolete and had been bought in the 60’s and 70’s from erstwhile USSR. It is estimated that India will need around $20bn to upgrade and replace the Russian armament in use by the defence forces.

A senior executive of the Kolkata-based Ordnance Factories Board, which controls the 39 Indian state owned defence ordnance factories said, talks are in advanced stages with Raytheon for the license production of precision ammunition at Indian facilities. The executive however refused to give details but added that foreign tie ups are being encouraged by the Indian defence ministry as part of a new policy on state owned ordnance factories.

Mumbai-based private sector defence major Larsen & Toubro which has got orders for building the hull of India’s classified homegrown nuclear submarine has tied up with EADS to bid for electronic warfare contracts in India.

IT major, Mumbai based Rolta India has tied up with Thales on equity sharing basis to form a subsidiary which will get operational in July. Rolta is a provider of Geospatial Information System solutions and the joint venture will look for a share in the growing C4I market in India as Indian defence force operationalise the network centric systems in the next five to seven years. The network centric market is estimated at around $4bn.

Tata Power and Larsen & Toubro are also planning to contribute out separate defence companies from the parent companies which are into a variety of business products including defence. The Indian defence market was recently opened for the first time to private sector players in 2001, and it is time we concentrate on defence as a separate corporate entity said an executive of Larsen & Toubro.

Tata Power which is currently into the main business of energy and defence electronics will in the future need to separate into a defence company or merge with other companies of the Tata group of companies which are in the business of defence including NELCO, Tata Technologies, and Tata Advanced Composite systems which makes advanced material for use in missiles and aerospace.

Tata Power last year was granted seven licenses in the defence sector which could end up with a business of more then $5bn. The seven defence production l

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