New Delhi: The new foreign direct investment (FDI) norms will be tested shortly for the first time by the defence sector.
Larsen and Toubro Ltd (L&T) and EADS NV will shortly approach the Foreign Investment Promotion Board, or FIPB, for setting up a joint venture for engineering and research activities in the defence sector, people familiar with the development said.
This joint venture company will then make downstream investments for manufacturing of defence equipment such as radars, avionics and electronic warfare equipment in India to cater to the domestic and overseas markets.
EADS, a European aerospace and defence firm, will hold nearly 24% stake in the subsidiary and the balance will be with L&T. EADS’ proposed holding is less than the cap of 26% FDI permitted by the Indian government in the defence sector. The ownership and control of the joint venture company will be with L&T.
The people familiar with the matter said the joint venture will conform with India’s offset policy in defence, which encourages domestic manufacturing of defence equipment.
EADS and L&T will in their presentation to FIPB state that the benefits of the joint venture include a large investment, initial job creation of nearly 400 and foreign exchange savings, they added. Access to EADS’ technology will be another benefit that will likely to be included in the application to FIPB.
EADS had reported revenue of €43.3 billion (about Rs3.4 trillion) in 2008.