Bangalore: State-owned defence equipment maker Bharat Electronics Ltd (BEL) plans to nearly double its revenue to Rs10,000 crore by 2013 and is looking for long-term tie-ups with overseas companies, chairman and managing director Ashwani Kumar Datt said in an interview. Edited excerpt:
How much business do you expect in the next five years?
In the last financial year, we did business worth over Rs5,200 crore. This year we are expecting that to increase by Rs200 crore from the last year’s figure. Our order book today is Rs16,000 crore, with Rs5,000 crore more coming in this year. By 2013, we should grow to a Rs10,000 crore company.
Aiming higher: BEL chairman Ashwani Kumar Datt. Hemant Mishra/Mint
How has the Indian defence electronics industry shaped up since independence and what has been your company’s role in it?
BEL was established in 1954, so we have known the business of defence electronics since a long time. We were around even before the Defence Research and Development Organisation was formed. Therefore, we had the responsibility of doing most of the preliminary groundwork as there was no electronics industry existing in India then. The private industry thought that it was not economically feasible to invest in this field. So we survived in an environment with no competition. When we started out in the defence electronics sector, there was no way the country could develop systems required by the armed forces. Communications is the area where BEL entered first. Then we graduated to sonars, radars and so on, increasing the complexity of the systems to be built. Even today, with private investment coming into the sector, we play a pivotal role in large defence electronics systems.
How has BEL’s role changed over time?
From being just a designer, BEL has now become an organization which is strategically very important to the country. It took 46 years for BEL to cross the Rs1,000 crore revenue barrier and that was in the year 2000. And in March 2010, we recorded a turnover of Rs5,200 crore. Therefore, we are bound to sustain our core areas of work, even while we diversify into related areas. India’s movement towards privatization was building up since 1991 when India opened its market. With offset policies and big-ticket projects, BEL will have to face competition from private companies. However, we think that only a few companies will survive.
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Take us through your partnerships with foreign companies.
In the initial years, we had the advantage of tie-ups with France, the UK and the US, which was project-specific. The scenario is changing now. We are looking at partnerships that can fill the technology gap instead of doing business in terms of projects. We are looking to fill gaps in making seekers for missile systems, night-life thermal images, image interface, specific radars and so on. We have had successful tie-ups with companies like General Electric Co., by way of joint ventures. We also had a successful tie up with a Dutch company for making image intensifier tubes, which went very well till the US imposed sanctions after the 1998 nuclear tests. This is now BEL Optronic Devices Ltd, a wholly owned BEL subsidiary. We are again looking at tying up with another company for the same. We would continue looking at tie-ups in areas where there are knowledge gaps. What is changing now is that we are going in for long-term strategic tie-ups.
What are the plans in the civil space?
On the civil front we are looking towards the nuclear power instrumentation sector. We have a joint venture with Bharat Heavy Electricals Ltd (Bhel) to manufacture (a) 250MW solar photovoltaic production facility for processing silicon wafers, solar cells and photovoltaic modules with 50:50 equity holding. It is a Rs2,000 crore venture.
How much business do you see being generated by way of offsets?
The offset value addition from BEL will be in radars, missile systems, electronic warfare system, communications and optics. Our export order book today is $60 million (Rs272.34 crore), out of which $40 million accounts for offsets. We are looking primarily at the aerospace sector for this, especially big contracts like the medium multi-role combat aircraft (MMRCA). We will be involved with all the six competitors who are in race for the deal. We will have offset orders irrespective of whoever wins the contract to provide the Indian Air Force with MMRCA. We have the ability to carry out projects based on their specifications. So we will look for a bulk of this business. In the next five years, we estimate this figure will grow to $300-500 million.
How do you perceive changes in defence procurement policy 2011 and the production policy?
It’s not a cause of worry for a defence public sector undertaking like ours. In fact, we view it as a positive development. To develop new age electronic warfare equipment would require long-term commitment, which only companies like BEL can offer. Such projects cannot be left to the vagaries of competitive process. New abilities should be created without harming the present abilities. The production policy is aimed at giving private players a helping hand.
What is your view on increasing foreign direct investment (FDI)?
This would not necessarily mean that any great abilities would be developed inside the country. However, in case of very advanced technologies, which countries are reluctant to part with, the issue should be considered on merit. After all, you cannot expect any country to spend years of work and money on a technology, and part with it at a low price. In case of big-ticket projects, you can bargain slightly more. Hence, extending the FDI limit from 26% should be considered on a case-to-case basis.
Graphic by Yogesh Kumar/Mint