Indian Private Players push for larger share in Defense Equipment Sector

Last updated on Jun 11, 2012

Posted on Jun 11, 2012

India’s billionaires have a new industry focus these days.  Defense Equipment.

As India’s focus shifts from Pakistan to China as the main enemy and its status as the counter-balancing force in Asia, Indian Government is looking at substantial investments in Defense.  And Private players – local ones – will be an important part of the equation.  They already are – 10% of the spending – mainly as sub-contractors to the PSUs.  This will grow.

“Anybody with anything in their pocket is talking defense now,” said Neelu Khatri, a defense analyst at KPMG.

KPMG’s analyst sums up the sentiment.  Adi Godrej, Azim Premji, Mukesh Ambani, Baba Kalyani (Kalyani group), and Ajay Piramal all have their eyes set on this rather lucrative and profitable sector.

Following efforts are underway:

  • Mahindra & Mahindra is tying up with Israel-based Rafael Advanced Defense Systems Ltd. for naval weapon systems
  • Ajay Piramal is looking at “defense acquisition and other defense projects”
  • Kalyani Group will be “spending 1 billion rupees over the next two to three years on new defense projects including bombs, shells and a 155 millimeter towed artillery gun”.
  • WIPRO has already agreed with “European Aeronautic, Defense & Space Co. (EAD) unit to manufacture aerospace actuators, a controlling system, and related precision engineering components”.  A plant where this manufacturing will be done is already underway.
  • Reliance Industries Limited (RIL) has already signed an agreement this year with Dassault Aviation SA (AM) to explore defense projects

The Indian companies are already looking at opportunities to acquire small and medium defense manufacturers in Europe and US.

One wonders if the joint collaboration between the Government and the Private sector be good for India?  Admittedly, there will be huge profit margins for the private players, but one also sees the possibility of getting things delivered.

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