Mumbai:Pipavav Defence and Offshore Engineering Co. Ltd and Airbus SAS have agreed to jointly start an aircraft maintenance, repair and overhaul (MRO) unit in India.
EADS NV, the parent company of Airbus, will hold 26-49% equity in the joint venture, Pipavav said in a filing to stock exchanges on Wednesday. Pipavav will hold a 51% stake.
“The first-phase MRO facilities and associated infrastructure are likely to cost $100 million (Rs 489 crore),” Pipavav said in its filing. “The MRO facilities and associated infrastructure will be used for civilian and military applications.”
Mint could not immediately contact EADS for comment.
A person familiar with the matter said the MRO facility will also have spare parts and logistics units.
“The name, necessary approvals, agreements and equity structure would be finalized in the next three months. The company would also induct a technical partner to run the aircraft repair facility,” this person said, adding the deal will help Pipavav, until recently known as Pipavav Shipyard, position itself in the aerospace sector.
Five places are shortlisted for the MRO unit—Cochin International Airport in Kerala, old Bangalore international airport, a small airport site in Maharashtra and two other sites near private airports, he added, requesting anonymity.
Pipavav shares rose 2.7% to end trading at Rs 79.90 on BSE on Wednesday. The Sensex shed 0.47%.
As India’s aviation sector grows, the MRO market is expected to more than double revenue to $1.06 billion by 2015 from $499 million in 2009, according to a 2009 report by business research firm Frost and Sullivan. MRO service requirements in the country are expected to grow annually at a compounded rate of 13.5% in the same period.
“Labour costs in India are around $30-35 per man hour, compared with $55-60 in South-East Asia and the Middle East and even higher in the US and Europe,” Frost and Sullivan analysts Chethan Kambi and Arun Narayanan wrote in the report. “Therefore, India has potential to service not just Indian aircraft but also those from neighbouring regions.”
India’s MRO sector has been gathering pace in recent years.
In November, the aeronautical division of Europe’s largest airline, Air France-KLM group, entered India’s aircraft component repair market by acquiring a 26% stake in Mumbai-based MRO company Max AeroSpace and Aviation Ltd for an undisclosed amount.
Mumbai-based Air Works Engineering, which began repairing aircraft 59 years ago, started an MRO facility in Hosur, Tamil Nadu, and acquired European aircraft refurbishing and painting firm Air Livery for an undisclosed amount in 2010. Engineering firm Punj Lloyd Ltd and US-based private equity firm Global Technology Investment each hold a 33% stake in Air Works.
Airport developer GMR Group is in the process of starting an MRO facility with Malaysian Aerospace Engineering Sdn Bhd at the Hyderabad airport, and Air India is building an MRO with Boeing Co.