Indian Defence Business Perspective

14
Indian Defence Business Perspective A Pragmatic Approach

Transcript of Indian Defence Business Perspective

Page 1: Indian Defence Business Perspective

Indian Defence Business Perspective

A Pragmatic Approach

Page 2: Indian Defence Business Perspective

MoD Land System

◦ Indian Army

Naval System

◦ Indian Navy

◦ Coastguards

Air System

◦ Indian Air Force

External Security

MHA

Border Security Force

Assam Rifles

SSB

Page 3: Indian Defence Business Perspective

Paramilitary Forces◦ CRPF◦ CISF◦ BSF◦ SSB◦ ITBP

State Police

Others◦ BP R&D◦ NSG◦ IB◦ NIA

Internal Security

Manpower and Equipment need is large!

1.25 million men in Indian Army, and further over 1 million in paramilitary organizations (above and next page).

Indian Amy has approx. 130,000 light to heavy wheeled vehicles, not including Jeeps or armoured vehicles

Page 4: Indian Defence Business Perspective

India’s total defense expenditure during 2015-2019 is expected to be $241.2 billion, of which about $100 billion is expected to be equipment. 

70% is at present Import, and India is the world largest Defence Importer.

GoI wishes to reduce import Foreign Exchange outflow by:

Imposing stringent Offset Liabilities of 30 to 50%

Encouraging Local Companies to participate, rather than increasing

dependence on Government Owned Enterprises (OFB, BEML etc.)

In addition, Internal Security expenditure with Paramilitary Forces is expected to be $12.5 billion between 2015-17

Business Potential

Page 5: Indian Defence Business Perspective

Until recently FDI was capped at 26% (49% possible in theory but never happened in practice until recently)

New Government talked of 49-51%, with 74% allowed with Transfer of Technology and up to 100% in “special circumstances”

But resistance from Ministry and established players.

New budget allows 49%, and strong rumours of increase to 51+% as administrative order.

Will still require DIPP Registration/Licence.

Liberalization of Defence Company Ownership

Page 6: Indian Defence Business Perspective

Sr. Projects VolumeRevenue

(in Million $) Remarks

1 LSV 4000 466 RFP Released

2 LAM 1200 340 RFP Released

3 2.5T- 4x4 15000 500 Replacement of TATA 715-4x4

4 5T-4x4 50000 3000 Replacement of AL Stallion 4x4

8 Mounted Gun System 814 1900RFI Stages

9 Towed Gun System 400+1200 TBD

10 LBPV 4x4 >500 100Future Projects

11 IMV 3000 250

Opportunities

Other opportunities include FICV, UGV, APC 6x6, etc.

Page 7: Indian Defence Business Perspective

Internal discussions in Army

Acceptance of Necessity and draft QR

RFI (Draft Spec) issued to potential OEM

Feedback Evaluated (Localization content set)

Project Lifecycle - DPP ProceduresINITIATION

EXECUTION RFP (Firm Spec) issued with terms of reference

OEM make Technical and Commercial Offers

Technical offers evaluated &Test Vehicles requested (Usually NCNC)

Trials take place (Typically 2 years+)

Commercial bids opened for successful vehicles. Low bidder designated L1

Negotiations with L1 and order placement. (36 months from the date of release of RFP)

CONCLUSION

Page 8: Indian Defence Business Perspective

Attempt was to produce a transparent (corruption free) System (not 100% successful!)But:

◦ No bonus points for superior product- User gets the minimum offering that just scrapes through the trials, not be best product!

◦ NCNC System means that costs to compete are high – no SME can afford to gamble so high!

◦ Slow! Typically 4 years from RFI to first production. User will demand that initially quoted costs should stand.

◦ No detailed long term plan published by Army. Inadequate time for vehicle development if wait for firm spec in RFP.

◦ Only considers first acquisition cost, not through life cost.

TIMING MUCH QUICKER IN PARAMILITARY!

Weakness of DPP System

Page 9: Indian Defence Business Perspective

Tata Motors – Strongest player Defence Logistics and Armoured. Ashok Leyland. – Recent top performer, have Super Stallion contract. OFB – 100% GoI Ownership. Licensed manufacturer of Tata 2.5T-4x4 and

Ashok Leyland Stallion 4x4. Have looked at other partnerships. Mahindra (Defence Land Systems) – past player in jeeps, have an MPV,

used to have BAE partnership. Not financially successful. AMW – New entrant with a strong R&D team. SA partnership. BEML – 54% GoI Ownership. Used to team with Tatra, looking for more

opportunities. MAN India – have tried to enter with Heavies. Not yet successful due to

high price and limited products. Volvo – Eicher – Little apparent interest at present. Bharat Benz (Daimler Benz) – No interest as yet. Larsen and Toubro (L&T) – have teamed with vehicle manufacturers

and may enter themselves. Bharta Forge –Building a Defence business, intially in Artlillery &

Armoured vehicles

Competitive Landscape- India

Page 10: Indian Defence Business Perspective

Competitive Landscape- India

Stallion

LAM

FICVMPV

2.5T -4x4TATRA 8x8

MARKSMAN

HMV 8x8

LSV

Page 11: Indian Defence Business Perspective

Indian RFPs tend to be rather unique, and difficult to adapt an existing vehicle to meet these.

Indian components are very low cost compared to US and EU. (30-60% Typically). To be cost competitive must plan on maximizing Indian content.

What would be considered a low price in US/EU would be a very high price in India and unlikely to be L1.

Importance of Indian Development

Page 12: Indian Defence Business Perspective

International Truck Makers use Indian sourced Product (Daimler Benz, Volvo)

Costs are very low in India by US/EU standards Indian products generally acceptable in Asia, ME,

North and Sub Saharan Africa, Latin America. Huge Market out there, but spread over 90-100

countries.

India as a source for Exports to 2nd or 3rd world countries.

Page 13: Indian Defence Business Perspective

In-depth understanding of Defence establishments & acquisition

plan

Expert in DPP

Key contacts

Expert field management of Trials

Business development- Partnership/JV

Resourceful in facility development

Strong organization builder of sound technical & support team

Exports & Line of credit opportunity

Experience & Expertise

Page 14: Indian Defence Business Perspective

THIS IS ALL FOLKS!