Tata banks on defence, aerospace for 7.5% revenue jump

The Tata Group expects its defence and aerospace business to increase its revenue by 7.5 per cent to Rs2,650 crore in year to 31 March, said Mukund Rajan, member, group executive council and the brand custodian of Tata Sons.

The conglomerate's push to grow its defence business comes as the Narendra Modi government encourages companies to manufacture defence equipment in India, the world's biggest importer of armaments. India has set an ambitious plan to replace ageing weapons systems and modernize its military.

Defence and aerospace are important growth drivers identified by Tata group chairman Cyrus Mistry and significant investments will be made in these areas, Rajan told reporters in Mumbai on Wednesday.

''In the last five years, revenue from the defence and aerospace business for the group has grown at a compound annual growth rate (CAGR) of 18 per cent,'' Rajan said.

Tata group firms engaged in the defence and aerospace sector include Tata Advanced Systems Ltd (TAS) and its subsidiaries, Tata Advanced Materials, Tata Motors Ltd, Tata Power Strategic Engineering Division, TAL Manufacturing Solutions, Tata Technologies, Tata Consultancy Services Ltd, Tata Steel Ltd, and Tata Elxsi Ltd.

Defence has the potential to contribute 15 per cent to Tata Motors's revenue from the current 3 per cent if the company managed to get the Indian Army's FICV (fighting infantry combat vehicle) order, said Vernon Noronha, vice-president of defence and government business at Tata Motors.

The FICV contract, contenders for which include Larsen and Toubro Ltd, Mahindra and Mahindra, Reliance Defence and Engineering Ltd (formerly Pipavav Defence), and Titagarh Wagons Ltd, could result in orders worth about Rs60,000 crore over the next few years.

The order book of TAS stands at Rs4,500 crore, a majority of which are export orders, said Sukaran Singh, chief executive of Tata Advanced Systems.

It expects to get more orders in the domestic market, he said.

TAS is working on projects including missiles, radars, aerospace and unmanned aerial vehicles and counts companies such as Lockheed Martin Corp, Sikorsky Aircraft Corp, Boeing Co, Pilatus?Aircraft?Ltd, Cobham, RUAG and Rolls-Royce as its customers.

In November, TAS formed a joint venture with Boeing for making aerostructures for aircraft, deliveries for which will start from 2018.

Tata Motors, in partnership with the Defence Research and Development Organisation, has also designed and developed India's first amphibious infantry combat vehicle Kestrel.

Last week, the automaker tied up with Bharat Forge and General Dynamics Land Systems to develop FICVs for the Indian armed forces.

Tata Motors has supplied over 100,000 vehicles to the Indian military and paramilitary forces, so far, and expects its future growth to come from combat vehicles, the group's executives said.

SED, another group company, is planning to invest Rs700 crore in setting up a defence equipment manufacturing plant in Karnataka, the executives said on Wednesday.

SED plans to double investments at this plant over the next two to three years, they said.

A number of Indian companies have already applied for industrial licences from the ministry of commerce to locally manufacture military equipment, including airplanes and warships.

Apart from the Tata companies, Bharat Forge Ltd, Reliance Industries Ltd, L&T, the Godrej Group and Mahindra Group are currently strengthening their presence in the defence sector.

Anil Ambani's Reliance Group and Adani Defence Systems and Technologies Ltd have also entered the sector.

India had in 2014 increased its foreign direct investment limit in the defence sector to 49 per cent from 26 per cent earlier.