The joint venture, Dassault Reliance Aerospace Ltd, will manufacture aircraft components as part of the offset obligation connected to the purchase of 36 Rafale fighter jets from France
Mumbai: French company Dassault Aviation SA will invest €100 million (around Rs760 crore) in its joint venture with Anil Ambani’s Reliance Group to manufacture components for its aircraft.
The joint venture, Dassault Reliance Aerospace Ltd, in which the French company holds a 49% stake, will make components for the Legacy Falcon 2000 Series of civil aircraft and be part of its global supply chain, the firm said in a statement. Production will begin from 2018.
The Reliance Group will make a similar investment in the joint venture, said Eric Trappier, chairman of Dassault Aviation. He was talking to reporters on the sidelines of an event to lay the foundation stone for Dhirubhai Ambani Aerospace Park, the joint venture’s manufacturing facility in Nagpur on Friday.
Reliance Group chairman Anil Ambani said both firms would bring in necessary funds in the form of debt and equity. He said Dassault’s investment was the largest foreign direct investment (FDI) in the defence manufacturing sector but didn’t explicitly state his group’s investments in the joint venture. In a separate statement, Reliance Group said that it was investing Rs6,500 crore in the 289-acre Dhirubhai Ambani Aerospace Park.
The joint venture’s production comes under the offset clause of the Rafale fighter jets deal signed by India and France last year. Under that agreement, France sold 36 Rafale jets to India for Rs59,000 crore; in return, French companies involved in the manufacture of the aircraft have to invest 50% of the amount in India’s defence manufacturing ecosystem and making components locally.
“We expect…over a period of time, India to be the global manufacturer of Falcon aircraft," said Ambani at the event. “Over a period of time, the entire aircraft will be made in India."
He said that the group expected other firms such as Thales SA, MBD Design and other international companies to locate their facilities in the Dhirubhai Ambani Aerospace Park.
Trappier of Dassault said that he had a target of selling about 1,000 Falcon jets over the next 10 years. He said that if the firm gets fresh orders for Rafale jets (apart from the 36 already ordered), then the firm would consider assembling the aircraft in India.
“We are ready to answer to the needs of the government of India for additional planes, for the Indian Air Force and Navy. This will go through the ‘Make in India’ policy for manufacturing parts of the Rafale (and) also assembly line," said Trappier. He wouldn’t specify what was the minimum order needed to start assembly of these jets in India.
The joint venture has the maintenance contract for the 36 Rafale jets that have been ordered from France for 50 years, said Ambani. He said the JV will focus on both defence and commercial aircraft.
Reliance Group is increasingly focusing on defence manufacturing, which is a sunshine sector in the country after the government made it easier for private firms to bid for contracts, and as it looks to sell assets in other businesses to reduce debt.
In a shareholder presentation on its website, Reliance Infrastructure Ltd, the parent company of Reliance Defence, said that it saw a Rs15 trillion opportunity in the defence sector over the next 15 years.
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.