Reliance Group gets an edge in defence play

  • The Anil Ambani led-Reliance Group signed an agreement with Dassault Aviation of France, the makers of Rafale fighter jets, for a joint venture in India to be named Dassault Reliance Aerospace, to execute offsets for the recently-concluded Rafale deal. The Rafale Jet deal that India signed has a 50 per cent offset clause to be executed by Dassault and its partners in India amounting to about Rs. 30,000 crore.

    Defence focus

    “With Pipavav, we are one of the two players in the country to build war ships for the navy and with today’s JV announcement, we will be the leading private sector player in aerospace as well,” said a close confidante of Mr. Anil Ambani. At the AGM of Reliance Infrastructure last week, Mr. Ambani had highlighted that defence would be one of the major pillars of growth for the Reliance Group as India is one of the largest importers of defence equipment. Reliance Defence, a wholly-owned subsidiary of R-Infra, is looking at an integrated play in the defence sector across all verticals of the army, navy and air force. “We are looking to pursue foreign military sales over the next few years,” Mr. Ambani had said addressing a shareholder’s query during the AGM. “The submarine program entails an order for six submarines for a value of over Rs.60,000 crore,” he had said. Reliance Infrastructure CEO Lalit Jalan had told The Hindu recently that the company had plans to increase its work order by 10 times to Rs.30,000 crore by the end of this fiscal.

    Other partners?

    “The venture will lead to a quantum jump in aerospace manufacturing by way of setting up of manufacturing capabilities, assembly lines and components amongst others,” said a senior official in the Reliance Group. However, given the size of the offsets that India has mandated, there are likely to be other offset partners as well for the foreign player. This, in turn, may open up opportunities for the Micro, Small and Medium enterprises (MSME) through sourcing and contracting. Industry sources said that the JV would focus on aero structures, electronics and engines and add to the infrastructure and supply chain in India for the aerospace sector. An integrated facility is to be set up at Reliance’s Special Economic Zone in Nagpur. Work is expected to begin in the next couple of months and production intended to begin within 12 months, sources said. “The offsets are only for 7 years but the JV will be part of the global supply chain of Rafale jets to support the larger programme,” one industry observer noted. Paras Bothra, Head, Research, Ashika Stock Broking said that the results of the group’s strategy would be known in the coming years as defence projects have long gestation periods. “Reliance Group is restructuring its businesses to de-leverage its balance sheet and focus on key growth areas,” he said.


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