New Delhi: Engineering conglomerate Larsen & Toubro Ltd on Monday said it will form a joint venture (JV) with France’s MBDA to develop and supply missiles and missile systems to the Indian armed forces.
MBDA is jointly held by Airbus Group, BAE Systems and Leonardo and has expertise in developing all kinds of missile systems.
In the joint venture, L&T MBDA Missile Systems Ltd, L&T will hold 51% while MBDA will control 49%. Both parties declined to share details of investments that will go into the joint venture.
The move to set up a joint venture comes in the wake of the Indian government deciding not to buy missile systems from overseas but source them domestically.
“To begin with, the JV company will look to develop and supply fifth-generation anti-tank guided missiles for coastal and high-speed target drones,” both companies said in a joint statement.
Besides, the joint venture will also bid for major programmes in the local market.
The joint venture will operate from a dedicated work centre, which will include pyrotechnical integration and final checkout facilities, L&T and MBDA said in the statement. The venture is expected to be incorporated in the first half of 2017 after necessary approvals and it will come out with its first product in two years.
A.M. Naik, the 74-year-old who is group executive chairman at L&T, said that increased activities in India’s defence sector, spurred by the government’s efforts to procure a significant portion of defence equipment locally, prompted his company to sign the agreement with MBDA.
“There are some activities now, which shows that private sector is going to play a role in India’s defence program. We are feeling that the time has come where we have to gear up... in the next 2-3 years... by when the action will be on the floor. We will have to start manufacturing on the shop floor of what we design. It is those encouragements and seeing the picture that is emerging in India that we decided that we should have a relationship with a global major and most competent company in the world,” Naik said at a press conference.
L&T and MBDA have worked together for the past six years in certain offset projects.
According to Antoine Bouvier, chief executive of MBDA, his company is prepared to share the most sensitive technologies with India. “In doing so, we are supported by our government,” Bouvier said.
“This JV is also a commitment to respond to the call of the Indian authorities—call for more make in India, call for indigenization in defence, call for Indian private industry to take a larger responsibility in defence,” he added.
Since assuming office, the National Democratic Alliance (NDA) government has been stressing that defence manufacturing is a crucial pillar to revitalize the manufacturing sector and put India on the road to self-reliance in defence products.
The Make in India initiative is over two years old and despite promises from a significant number of foreign original equipment manufacturers (OEMs), there is little action seen on the ground and one of the major obstacles has been transfer of key technologies.
But for Naik’s company, defence continues to be a major area of thrust, which will contribute Rs10,000 crore to its annual revenue by 2021.
“When I said that by 2021, defence will be a very important part of L&T’s business portfolio, I had in mind around Rs10,000 crore per year as our target and we think we are well on our way,” Naik said.
L&T will generate around Rs4,600 crore by manufacturing at least 100 K9 Vajra howitzers.
The K9 Vajra is an indigenized version of a Samsung mobile howitzer. The gun is mounted on a tracked platform, making it manoeuvrable over tough terrain. The 155-mm howitzer can hit targets at a distance of 40km.
“We are involved in many, many programmes, which will be decided in 2017-18 and 2018-19. Therefore, we think Rs10,000 crore is a reasonable assumption,” Naik said.