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Ratan Tata to head helicopter joint venture

Ratan Tata to head helicopter joint venture

Farnborough: Ratan Tata, head of the Tata group, is set to be the chairman of the country’s first private helicopter assembly line, Indian Rotorcraft Ltd.

The firm is a joint venture (JV) between holding company Tata Sons Ltd and Italy-based Finmeccanica SpA’s helicopter unit AgustaWestland. The Tata group has a 74% stake.

“He was kind enough to become the chairman of the JV," Giuseppe Orsi, chief executive of AgustaWestland, said in an interview on the sidelines of the ongoing Farnborough airshow in the UK. “This decision has recently been made and is likely to be implemented (soon)."

Orsi will be co-chairman.

State-owned Hindustan Aeronautics Ltd (HAL) is the only other helicopter maker in India. Another Tata group company, Tata Advanced Systems Ltd, has a joint venture with Sikorsky Aircraft Corp., a subsidiary of US-based United Technologies Corp., to assemble helicopter cabins in India. The venture was announced in November.

Indian Rotorcraft’s plant, to be set up in Hyderabad, will manufacture AgustaWestland’s eight-seat utility helicopter AW119, which will be rolled out by the end of 2011 or early 2012. The facility can also cater to military requirements if the need arises, Orsi said.

The Italian firm has an offset obligation to India of around €280 million (around Rs1,700 crore) and the assembly line will address part of that requirement.

Indian Rotorcraft’s $30 million investment in the assembly line will be spread over two years, he added.

The two sides in the joint venture, announced in February, are already looking at expanding the scale of the plant.

The facility will be located at the aerospace park in the Hyderabad international airport campus.

“We initiated talks with two SEZs (special economic zones) in Hyderabad, one within the airport and one outside the airport, where Tata already has its existing operations. After evaluating, we have decided to go ahead with the SEZ within the airport as that will not just provide us with greenfield (space), but also other infrastructural benefits," Orsi said.

“We are also in the advance stages of negotiating with Ratan Tata for the further expansion of the proposed activity, which will create the need of a larger area for the joint venture," he added.

The utility helicopter, of which 190 have been sold so far globally, is now built in AgustaWestland’s facility in Philadelphia. Gradually, production of the AW119s will be shifted entirely to India and the US facility, which employs some 500 people, will make other helicopter models.

The “total number of employees (in India) will start with 50 and then grow up to 100 in the medium term and then more with expansion. We shall bring the backlog of helicopters to India. We will be selling this helicopter across the globe, (with a) delivery of about 15 per year," Orsi added.

Finmeccanica’s offset obligation arises from a €560 million order it won earlier this year for a dozen AW101 helicopters for India’s president, prime minister and visiting heads of state, to be operated by the Indian Air Force.

India’s defence procurement policy mandates foreign firms that have won contracts of Rs300 crore or more to procure equipment worth at least 30% of the deal amount from local suppliers to boost the domestic arms manufacturing industry.

“We are in the range of 50% of the amount of the sales we achieve," Orsi said of the offset obligation. “In the ensuing years, we are looking at partnership(s) with Tata, HAL and also in the sector of services (not industrial) that can stem out of the assembly process. However, it’s too early to comment," said Orsi.

Orsi said AgustaWestland has applied to increase its stake in Indian Rotorcraft from 26% to 50%. India’s foreign direct investment rules do not allow a foreign firm to hold more than 26% in the defence sector, but the government makes exceptions on a case-to-case basis.

Tarun Shukla is in Farnborough as a guest of Finmeccanica SpA.


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