Reliance-Dassault JV aims at Rs30,000 cr from Rafale deal

With a new joint venture announced with French aerospace giant Dassault Aviation, Anil Ambani's Reliance Group is set to get a big slice of the Rafale fighter jet deal and will target business worth Rs30,000 crore as part of the offsets for the contract, The Economic Times Reports.

Last year, Dassault and Reliance Aerospace had announced the formation of Dassault Reliance Aerospace. Their plan is to set up a facility spread over 100 acres near Nagpur, with the joint venture looking at creating a complete supply chain for the Rafale fighter jet in India ( See: Reliance Defence to form JV with Dassault for Rafale offset ).

In 2015  Reliance Defence received conditional approval from the department of industrial policy and promotion (DIPP) for 12 industrial licences for eight of its subsidiaries for making defence equipment. These  subsidiaries expect to manufacture a full spectrum of defence equipment, including aircraft, helicopters, missiles, and night vision, naval and land systems ( Reliance Defence gets conditional nod for 12 industrial licences ).

Reliance Defence will be executing a decent portion of the nearly Rs30,000 crore of business that will flow in as offset in the Rs60,000-crore ($7.87 billion) deal.

The company had said at an analysts meet on Monday that the management wants to look at defence as the next new growth area, and will be eyeing opportunities under the Indian Army and Indian Air Force under the 15 subsidiaries and 3 joint ventures with foreign OEMs and explore Navy orders under the newly acquired Defence Research and Engineering Ltd (previously Pipavav Defence).

Overall the medium- to long-term domestic defence opportunity is pegged at Rs15.4 trillion. Having spent the previous two years in building capabilities and technology tie-ups, the management believes the tender to ordering cycle will commence in FY18 onwards.

The current order book is at Rs57 billion, to be executed by FY21.

The company has roped in veterans from industries under the Army, Air Force, and Navy divisions, with wide experience having worked in defence PSUs previously.

The incumbent government's policy stance favouring private sector participation along with the focus towards import substitution are enabling factors for growth, the company said.

The recently acquired Pipavav Shipyard having the largest dry dock with state of the art heavy engineering infrastructure will be a key differentiating factor from other private and domestic sector peers. Hence the company is confident of bagging the aircraft carrier order and is well placed for the 12-submarine (project 75I) orders.

It is also considering to build another shipyard in the east coast at Rambilli in Andhra Pradesh.

Near Nagpur, at Mihan, the company has built up a huge aerospace complex having own airport and airspace for fighter aircraft testing.

Overall, the defence opportunity and the plans of the company is huge, the major thing is the execution, margins and the order booking which is fraught with delays.

This offset will be availed by all partners, component manufacturers SMEs, MSMEs who would be working towards completing the Dassault order that will be delivered by the Reliance JV.