Mahindra & Mahindra Ltd and BAE Systems have signed an agreement to create a land systems-focused, joint venture defence company, based in India.
Mahindra will have a majority 74 per cent equity in the joint venture and BAE Systems will hold the remaining 26 per cent. The current foreign investment guidelines for the defence sector only allow equity investment of up to 26 per cent by a foreign investor.
The parties have agreed to invest around $21.25 million in the project initially. BAE Systems has agreed to invest $5.83 million in cash and Mahindra will contribute the balance.
The Foreign Investment Promotion Board had, earlier this year, approved the joint venture in which the two parent companies had proposed initial investment of $21.25 million over a three-year period.
"BAE Systems is the global number one land systems defence company and we couldn't have a better partner for this venture. We are already working together and the benefits for all parties, including the Indian defence and security forces, are clear. We look forward to making a major contribution both to the security and economy of India," Anand Mahindra, vice chairman and managing director of Mahindra Group, said.
"As winner of the 2009 Frost and Sullivan Award for Customer Value Enhancement, which recognises excellence in customer service, customer retention and ultimately customer base expansion, Mahindra Defence Systems is a great choice to be our land systems partner in India," Guy Griffiths, group managing director international, BAE Systems, said.