Archana Chaudhary, Bloomberg
Mumbai: Tata Power Ltd, India’s second- biggest utility by annual sales, plans to bid for a $400 million (Rs1,651 crore) defense contract, Rahul Chaudhry, chief executive officer of the company’s Strategic Electronics Division, said today.
The company’s electronics division will bid to upgrade the 150 millimeter Howitzer cannons, tenders for which are expected this year. The guns were purchased by India from Sweden’s Bofors Weapons Systems AB.
The contract will be the first Indian defense deal open to non-state competitors, Chaudhry said, giving companies such as Tata Power a chance to benefit from the Rs960 billion ($23 billion) spending that the government plans on the armed forces this fiscal year.
“If Tata Power wins this deal it will mean its electronics division will grow to earn substantial revenue in five years time,” said Mehul Mukati, an analyst at Mumbai-based Emkay Share and Stock Brokers. “But Indian defense contracts are typically known for procedural delays and that needs to be kept in mind.” Mukati has a “buy” rating on the stock.
Tata Power shares rose as much as Rs3.9, or 0.7%, to Rs577.8 on the Bombay Stock Exchange today. The stock traded at Rs575.05 at 1:51 pm local time.
Tata Power expects to compete with Larsen & Toubro, India’s biggest engineering company, to win this contract, Chaudhry said.
“This is something we are looking at seriously,” Chaudhry said in a telephone interview from New Delhi. “We certainly have the capability to build the system and will fight strongly for the deal.”
The Indian Defense Ministry may call for bids by the end of this year to replace mechanical systems on the Bofors guns with electronics and may also ask for an increase in the size of the barrel, Chaudhry said.
Tata Power’s electronics division has worked on electronics and software development programs for India’s Defence Research and Development Organisation since 1967. The company has in the past designed software systems for the multi-barrel rocket launcher ‘Pinaka’, surface-to-air missile ‘Aakash’ and electronic warfare systems ‘Sanjukta’.