Mahindra Systech in talks with aircraft maker to supply parts2 min read . Updated: 03 Jun 2010, 12:40 AM IST
Mahindra Systech in talks with aircraft maker to supply parts
Mumbai: The auto components and design engineering arm of Mahindra and Mahindra Ltd (M&M), Mahindra Systech, is in talks with one of the two leading global manufacturers of passenger planes to build advanced aircraft components, a senior Mahindra executive said.
Hemant Luthra, president (Systech sector) and a member of the group management board at M&M, said the company would be investing at least Rs150 crore, five times what it originally intended to, in an attempt to enhance its capabilities in component manufacturing.
European plane maker Airbus SAS and US-based Boeing Co. both source equipment from Indian vendors, but Luthra declined to identify the company with which Mahindra Systech is in talks.
India’s defence offset policy mandates that foreign contractors source components and systems from local vendors for at least 30% of the value of orders worth more than Rs300 crore that they get from India.
“In the next 18 months, we will be investing at least Rs150 crore in component manufacturing sector and look at contract manufacturing for third parties where there is no competition clause," Luthra said. He said the company will make 2-metre and 6-metre sections for planes.
The Mahindra and Mahindra group increased its exposure to the aerospace sector and enhanced the capability to build passenger planes when, in December, it bought two Australian aircraft firms, Aerostaff Australia and Gippsland Aeronautics. The Australian aerospace firms have sought a research grant of around $10 million for technology development.
Mahindra is already developing a five-seat plane with the National Aerospace Laboratories (NAL). Anand Mahindra, vice-chairman of M&M, has at public forums referred to his group’s ambition to become the “Embraer of India," a reference to the Brazilian small aircraft maker.
Mahindra is among the few private Indian firms that have developed aerospace manufacturing capability.
Luthra alluded to several aircraft manufacturers approaching Mahindra for contract manufacturing.
Some light-aircraft makers such as Piper Aircraft, Inc., Cessna Aircraft Co. and Hawker Beechcraft Corp. are looking for tie-ups for a range of aircraft models that they do not have in their own line-up. M&M could fill the gaps in their product portfolios.
Ratan Shrivastava, director for aerospace and defence at researcher Frost & Sullivan, said M&M was trying to address the aerospace vertical by deriving synergies from all its group companies.
“In the long run, Mahindra and Mahindra would be having ambitions to position itself as original equipment manufacturing company rather than just an engineering company," Shrivastava said.
In recent years, most plane makers have emerged as integrators, building the aircraft in their plant by sourcing systems and equipment from vendors. These vendors are also looking at Indian firms such as M&M to lower costs and tap the expertise of building components in composites—the lighter and strong material made from carbon fibre, an area India has gained expertise in its military aircraft project Tejas, and its rocket programme.
While the aerospace customers give orders for high-value components, they do not translate into volumes. M&M could spread its overheads by manufacturing high-end composites other than aircraft parts, such as windmill blades, said Luthra.
Companies such as M&M, Tata Advanced Materials Ltd and Larsen and Toubro Ltd have their sights on the defence offset opportunity thrown up by India’s plans to spend $100 billion to acquire fighter planes and on other purchases over the next decade.
In just the past 18 months, around $2 billion worth of offset contracts have been awarded to local firms.