Aero India 2023 | JV The Way

Smruti Deshpande

In sectors where 100 per cent foreign direct investment (FDI) is not allowed by law in India, foreign Original Equipment Manufacturers (OEM) can invest in joint ventures (JV) with Indian counterparts. The Indian government announced in May 2020 that the FDI limit in defence production will be raised to 74 per cent from 49 per cent under the automatic route as part of the reform in the defence sector to boost self-reliance.

According to Invest India, the ministry of defence set a target of achieving a turnover of 25 million USD in aerospace and defence manufacturing by 2025, which includes 5 billion USD in exports. Till October 2022, 595 industrial licences have been issued to 366 companies operating in the defence sector.

As a result of India seeking greater collaboration with foreign OEMs, a number of global manufacturers have set up shop in India in partnership with Indian companies. While this helps the armed forces get the required platforms within the country, the local defence industry can easily supply the spare parts. Today, major global defence conglomerates have partnered with Indian public and private manufacturers for a number of defence platforms ranging from missiles to aircraft.

JVs, however, are not a recent phenomenon in the Indian defence industry. One of the most successful joint ventures to have come out is the BrahMos Aerospace. The JV was set up in 1998 between India’s Defence Research and Development Organisation (DRDO) and Russia’s NPO Mashinostroyeniya. It started with an initial investment of Rs 1,300 crore. Today, the JV is worth more than Rs 40,000 crore. The JV was formed at a time when Russia was undergoing financial turmoil. At the Manufacturing Innovation Conclave organised by the Confederation of Indian Industry in 2019, former CEO and MD of BrahMos Aerospace, Sudhir Mishra said India should have entered into more collaborations.

Mahindra and Mahindra (M&M) had a JV with BAE Systems of the UK before it decided to acquire 26 per cent stake in its defence joint venture with BAE Systems, ending the three-year old partnership in 2013. The idea for the Defence Land Systems India was conceived of in 2009 and the intention was to produce high-mobility armoured and bullet-proof vehicles as well as artillery items.

Kalyani and Rafael

The Kalyani Rafael Advanced Systems (KRAS) joint venture between India’s Kalyani Group and Israel’s Rafael Advanced Systems Ltd in Hyderabad was inaugurated in 2017. It is spread across 24,000sqft. The Rs 70 crore unit will cater