Market Insight: Indian Defence – The Lucrative Air Platforms Market: MMRCA in Focus


Published on

The Indian Defence sector is growing at an unprecedented rate with the country now
ranked as the 10th largest investor in defence globally.

Published in: Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Market Insight: Indian Defence – The Lucrative Air Platforms Market: MMRCA in Focus

  1. 1. Market Insight: Indian Defence – The Lucrative Air Platforms Market: MMRCA in Focus Anshul Sharma, Senior Research Analyst – Aerospace, Defence & Security
  2. 2. Introduction The Indian Defence sector is growing at an unprecedented rate with the country now unprecedentedIndian Defence — The Lucrative Air Platforms Market: MMRCA in Focus ranked as the 10th largest investor in defence globally. India established itself as the World’s largest arms importer in 2011 with 70% of its defence procurement coming from s foreign companies. Russia, Israel and United states remain the top suppliers of defence equipment to India. The threat from China and Pakistan and their growing defence threat capabilities has led to a moderni modernisation drive with the official defence budget amounting to $36.54 billion in 2011 (1.8 per ce of GDP). Private sector participati 1.8 cent participation has seen significant growth in India’s indigenous defence production and a move from being suppliers of raw materials and parts to full scale licensed production. Military expenditure in India is forecasted to grow at a CAGR of 8.3% and is expected to exceed $ 75 billion per casted 8.3% year by 2020. Figure 1: Budget Forecasts for Indian Defence Market India : The Lucrative Air Platforms Market India’s quest for air power will continue throughout the decade and a major portion of India’s expenditure on capital acquisitions ( (new procurements) will be attributed to a ) air platforms. These are expected to exceed $ 6 billion per year by 2016. Some of the major programs are listed below. India Defence : Upcoming Big Ticket Purchases Program Maximum Volume Remarks Medium Multi Role Combat 126 (with an option to Dassault Rafale is the lowest Aircraft (MMRCA ) purchase 60 more) bidder. Contract to be finalised. finalised Induction in 2015 © 2012 Frost & Sullivan
  3. 3. Program Maximum Volume Remarks Fifth Generation fighter 214 Induction planned by 2017 aircraft (FGFA)Indian Defence — The Lucrative Air Platforms Market: MMRCA in Focus Advanced Medium 250 Induction planned by 2020 Combat Aircraft (AMCA) Multi Role Transport 45 Induction planned by 2016 Aircraft (MTA) Tejas Mk1 40 Induction planned in 2012 Tejas Mk2 180 Tejas Naval version 44 C-17 10 Contracted with an option Induction planned by 2013 to purchase 6 more P-8I Poseidon 8 Contracted with an option to Induction planned by 2013 buy 4 more. 12 more are planned for future bringing overall fleet to 24 Mig 29K 29 (Second batch) Deliveries to begin in 2012 Carrier based Multi Role RFI Issued For Navy’s third aircraft carrier fighter for Navy to be commissioned in 2018 Sukhoi Su30 MKI and 42 Induction in progress upgrade to Super Sukhois C-130 J 6 delivered, 6 more to be acquired Mi-17 Helicopters 80 ordered, second batch of Induction in progress 71 more to be ordered AH 64 D Helicopters 22 ordered, option to purchase 22 more S-70 Bravo or NH-90 16 ordered, 44 more to be Evaluation completed, contract acquired to be finalised IL 70 Phalcon AWACS 3 Induction in progress, One delivered PC-7 Pilatus Trainer 75 to be ordered Approval Pending Kamov 226T OR 197 Contract to be finalised Eurocopter AS550C3 Some high value indigenous defence projects include HJT-36 Sitara (73 contracted, 127 more to be ordered) ; Combat air trainers (57) ; Basic Trainer aircraft (106) ; Light combat helicopters (114) ; Light utility helicopters (187) © 2012 Frost & Sullivan
  4. 4. Deal in Focus: MMRCA – Dassault Rafale The Indian Government announced in January this year the selection of Dassault Rafale asIndian Defence — The Lucrative Air Platforms Market: MMRCA in Focus the lowest bidder in the $11 billion contract for 126 aircraft. Dassault Aviation will now be involved in cost negotiations with the Indian government and if the contract is finalised, it will be supplying the first 18 aircraft in fly away condition while the remaining 108 will be manufactured in partnership with Hindustan Aeronautics Limited. The cost of the deal is expected to escalate to $16-17 billion. The primary reason cited for Rafale’s selection by India is its lower direct acquisition cost as well as the life cycle cost over a 40 year period compared to Eurofighter Typhoon1. Both aircraft were found to be compliant on technical parameters after field trials by Indian air force. Interestingly, Rafale was the winner in a technical evaluation by Swiss air force according to a recently leaked report but despite that, Gripen was chosen due its low costs. India’s familiarity with the current fleet of French aircraft, Rafale’s Carrier based capability, weapons and nuclear capability are the other reasons why Rafale was preferred over the Eurofighter.2 Dassault Aviation will have to invest around $8 billion in offsets in the Indian industry which is going to provide a major boost to the original equipment manufacturers as well the small and medium enterprises. France has also ensured significant transfer of technology taking place as part of the deal. Dassault’s partners Thales and Safran will also benefit from the deal as they supply the avionics and engines for Rafale. Avionics and embedded systems provided by Thales amount to 25% of the total value of the aircraft while Safran’s subsidiary (Snecma) supplies the engines. Hindustan Aeronautics Limited will be the primary manufacturing partner of Dassault aviation in India. Offset Contracts will be awarded to the Indian companies by Dassault and its partners and this will lead to the continued growth of domestic defence manufacturing. Currently, the small and medium sized enterprises supply around 20-25% of the sub-assemblies and components to public sector units like Hindustan Aeronautics Limited. Dassault Rafale: Opportunities ahead There will be significant opportunities for organisations as a result of the Rafale contract, most likely those organisations who will be sub-contractors to Hindustan Aeronautics Limited. Only the Indian companies listed in the defence procurement procedure 2006 and the joint venture companies are eligible for offset contracts of this deal. However other companies will also be eligible if the new DPP is applicable for the contract. 1 2 © 2012 Frost & Sullivan
  5. 5. Potential Companies vying MMRCA offset contracts Companies Opportunity area RemarkIndian Defence — The Lucrative Air Platforms Market: MMRCA in Focus SNECMA HAL, Turbomeca Aero Engines Both are Safran’s ventures India in India Larsen and Toubro Airborne assemblies, Systems Established industry player, and equipments for aircrafts Already into full scale licensed production Mahindra Satyam, Wipro Large scale systems Integrator Established industry , Manufacturing players. Mahindra Satyam is partner with SAAB while Wipro with EADS Mahindra Aerospace, Max Manufacturing, Aero structure Mahindra is a new Player in aerospace components, Assembly of this area, while Max aircraft sub systems aerospace is a SME Tata Power, Tata advanced Avionics, Network Centric Established industry systems, Rolta Thales Warfare,airborne assemblies, players. Thales has joint C4ISR venture Rolta Thales Magnum aviation Aircraft, engine spares, SME Maintenance repair, overhaul Punj Lloyd aviation, Maini Precision manufacturing, SME’s Precision Products, aerostructure components , SEC industries had won Dynamatic Technologies, SEC Parts and accessories of contract from DCNS of Industries, Taneja Aerospace aircraft France for scorpene submarines. Maini is providing components for P- 8 Poseidon Infotech Enterprises, Axis Life cycle support, Engineering SME’s aerospace, Safran and design engineering services Halbit Avionics, Samtel Avionics, Aircraft displays, Samtel display systems Display systems, Data Simulator and training have a joint venture with Patterns, Avantel systems Thales. Won the contract for Mirage 2000 upgrade The Road Ahead: MOU’S and Joint Ventures After being selected as the lowest bidder in the MMRCA deal, Dassault Aviation has entered into a memorandum of understanding (MOU) with Reliance industries of India for collaboration in the defence sector in the areas of manufacturing and support. Immense opportunities will lie ahead for such strategic partnerships if this contract is finalised. As of 2012, the Indian Government has also approved the new guidelines for the public © 2012 Frost & Sullivan
  6. 6. sector units (PSUs) to establish joint ventures with private firms. Some of the recent joint ventures and partnerships in India are listed below.Indian Defence — The Lucrative Air Platforms Market: MMRCA in Focus Recent Defence Joint Ventures / Partnerships in India ( Starting 2010) Companies Area of Collaboration Wipro, CAE Simulation, C4ISR Augusta Westland, Tata Sons Assembly of AW 119 helicopters Rolls Royce, HAL Manufacturing Mahindra & Mahindra, BAE systems Land Vehicles for Indian army HAL, United aircraft corporation, Multi role transport Aircraft Rosoborn export Diehl Remscheid, India Forge Combat Vehicles, Development and production of Diehl system tracks Ashok Leyland, Paramount Group Manufacture of Mine Protected vehicles Lockheed Martin, Tata Advanced Aero structures manufacturing, design systems and development Tata advanced systems, HBL Elta Radar, Communications, Electronics Avionics warfare Bharat Electronics Limited, Terma Naval Radar and aircraft self-protection technologies Axis Aerospace, Rosoboron export Manufacture of avionics equipment for MiG aircraft Northrop Grumman, Pipavav Shipyard MOU signed to explore potential business relationships Mahindra & Mahindra, Telephonics Radar, surveillance and communication systems Conclusions & Key Recommendations for Suppliers The defence market in India is driven by modernisation programmes, huge market size, offset policy and threats from neighbour countries. The air platforms segment will be the most attractive segment in the country over the next decade, and India’s offset policy will be instrumental in enhancing the indigenous defence production capability in India. The Indian defence industry is currently undergoing a transition with increased participation from the private sector for direct bids. • The best strategy is to work on individual programs by becoming offset partners with foreign defence manufacturers entering the Indian market. A recent example © 2012 Frost & Sullivan
  7. 7. is the tie up between Wipro infrastructure engineering and EADS for a component manufacturing unit.Indian Defence — The Lucrative Air Platforms Market: MMRCA in Focus • With the strong hold of public sector undertakings in the Indian Defence market, joint ventures are likely to be the common entry strategy. One recent example is the joint venture between Lockheed Martin and Tata advanced systems • The Indian Air Force is trying to bring together a consortium of domestic firms to compete for the manufacture of medium transport aircraft. Formation of such consortiums is strongly advised to promote collaboration between domestic companies. • MoUs are likely to lay the road for future joint ventures. Such agreements are strongly encouraged to explore business partnership opportunities. Recently, Eurocopter has struck long-term agreements with Mahindra Satyam and Mahindra Aerospace - the engineering and aircraft manufacturing subsidiaries of Mahindra group. • Developing research and development or training centres is a strategy to build long-term relationships in the industry, and establish a sustainable presence in the market. A recent example is of SAAB India technology centre in partnership with Mahindra Satyam. Frost & Sullivan’s new report on Indian Defence Market is available now. To know more about this report please contact or About Frost & Sullivan Frost & Sullivan, the Growth Consulting Company, partners with clients to accelerate their growth. The companys Growth Partnership Services, Growth Consulting and Career Best Practices empower clients to create a growth focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 30 offices on six continents. For more information about Frost & Sullivan’s Growth Partnerships, visit © 2012 Frost & Sullivan