Punj Lloyd takes aim at arms and ammunition business

Punj Lloyd takes aim at arms and ammunition business

Mumbai: India’s leading engineering and construction company Punj Lloyd Ltd is planning a foray into defence equipment, a market which is worth Rs1 trillion, in a bid to expand its businesses.

Punj Lloyd, which is more active in infrastructure and energy projects, proposes to produce guns, rockets, missile artillery systems and related defence equipment and has applied for an industrial licence to make these products.

The licensing committee of the ministry of commerce is expected to take a decision on this soon. Leading companies and rivals such as Larsen & Toubro Ltd (which is an engineering and construction company), Tata Group, Mahindra & Mahindra Ltd, and others have already secured licences from the government to produce defence equipment.

“The investment for this proposed project would be based on the approvals by the government," said Punj Lloyd chairman and executive director Atul Punj. “Though it is a great business opportunity, we have not yet finalized the business model."

A senior executive of a leading company that has already secured a licence for defence production, and who does not want to be named because of competitive reasons, said the market for guns, missile artilleries and rockets would be at least Rs1 trillion.

“Companies are now increasingly showing interest on securing industrial licences for defence production. One will have wait and watch what is going to be the government’s stand and investment plans of private companies," he said.

According to ministry of defence guidelines, under offset obligations, foreign vendors will have to purchase or execute orders for defence products and components manufactured by Indian defence industries.

Offset obligations are agreements between two parties such as a government and a manufacturer, whereby the purchaser will mandate certain fixed terms that have to be honoured by the maker of the goods.

However, Punj Lloyd has not done a market study about the prospects of this offset obligations, according to Punj.

Punj Lloyd also recently forayed into the real estate space by signing a memorandum of understanding (MoU) with the Ramprastha Group for the development of multi-storied residential housing through a 50:50 joint venture. The MoU envisages the development of residential apartments in Ghaziabad, near Delhi, in approximately 29 acres in the first phase.

The company, in another diversification, it has also agreed to invest Rs403 crore for acquiring a 25.1% stake in Pipavav Shipyard Ltd. Earlier, the engineering and construction company had set up a subsidiary, Punj Lloyd Upstream Ltd, to provide onshore drilling services to domestic oil and gas exploration and production, with an initial investment of Rs44 crore.

Punj has also plans to try its luck in ground handling services at Indian airports. For this purpose, the company has entered into a 49:51 joint venture with Swissport International, a world leader in ground handling industry.