2 min read.Updated: 19 Jan 2016, 01:46 AM ISTP.R. Sanjai
Reliance Group had acquired Pipavav Defence from Nikhil Gandhi to tap growth opportunities in the defence industry
Reliance Infrastructure Ltd has taken over management control of Pipavav Defence and Offshore Engineering Co. Ltd and will hold 36.5% of the equity capital of the shipbuilding firm.
Reliance Group chairman Anil Ambani has taken over as chairman of Pipavav Defence.
“R-Infra, along with defence special purpose vehicles, are the new promoters of Pipavav Defence, and the company will be renamed Reliance Defence and Engineering Ltd," R-Infra said in a statement on Monday. H.S. Malhi, former chairman and managing director of Mazagaon Dock Ltd, has been appointed a whole-time director and chief executive officer of the company.
Reliance Group had acquired Pipavav Defence from Nikhil Gandhi to tap growth opportunities in the defence industry under Prime Minister Narendra Modi’s Make in India initiative.
The defence sector is likely to attract potential orders of ₹ 120,000 crore ($20 billion) in the next five years, said R-Infra. “Pipavav Defence is participating in various programmes in the field of new shipbuilding and maintenance, repair and overhaul which are in various stages of request-for-proposal or request-for-intent, and worth more than ₹ 180,000 crore," R-Infra said.
With the third largest army, the fourth largest air force and the seventh largest navy in the world, India is among the top 10 countries in terms of military expenditure and also the world’s largest arms importer.
In 2013-14, the country spent about $50 billion on its defence needs.
In December 2015, Reliance Defence secured 12 in-principle industrial licence approvals from the department of industrial policy and promotion for manufacturing aircraft, helicopters, unmanned aerial vehicles, all-terrain combat vehicles, night-vision devices, sensors, navigation and surveillance equipment, propulsion systems and simulators.
On 4 November, the Reliance Infrastructure board said new high-growth opportunities in the defence sector, arising from the Make in India and Skill India policies, serve vital national priorities and have several attractive features.
The board said that the features include relatively low capital intensity, a lower gestation period, minimal regulatory uncertainties, higher job creation and the potential for better return on equity.
During Monday’s board meeting, Pipavav Defence appointed Amitabh Jhunjhunwala as the director of the company and named Rahul Sarin, Ryna Karani and Rajendra P. Chitale as additional independent directors.
Nikhil Gandhi resigned as the chairman of Pipavav Defence while his brother Bhavesh Gandhi stepped down as executive vice chairman of the company. Both will continue to be non-executive directors on the board of Pipavav Defence.
The board also decided to issue equity shares, or equity-linked securities, to qualified institutional buyers (QIBs) up to ₹ 1,500 crore and approved a proposal to get the company to exit the corporate debt restructuring programme.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay High court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.