L&T, Europe’s missile maker MBDA form Defence JV
14 February 2017
Infrastructure major Larsen & Toubro has entered into a joint venture with European arms manufacturing group MBDA to supply missiles and missile systems to the Indian armed forces
L&T, which will hold 51 per cent stake in the joint venture, 'L&T MBDA Missile Systems Ltd', aims to double revenue to Rs 2 lakh crore by 2021 and has identified defence as one of the key drivers for achieving this growth. It has been building its capability on its own and has also formed joint ventures to acquire technology and eligibility.
“We are very committed to India's core nuclear and defence sector. We will work with our partner and make the joint venture a major success in the Indian missile programme,” said AM Naik, group executive chairman of L&T.
L&T did not disclose the financial details of the agreement. The joint venture aims to tap opportunity arising from the government’s ‘Make in India’ initiative. India allows foreign companies to own 100 per cent equity in the defence sector through the government approval route, while they can own 49 per cent through the automatic approval route.
The JV will be registered in India and will be subject to Indian laws. The partners are exploring two locations for setting up of an operation centre in the country. Naik said about 500 highly skilled people will be employed by L&T in India to work on these sophisticated missile systems.
These employees could be sent to Europe for further training and skill development. Initially, the joint venture will focus on developing and supplying fifth-generation anti-tank guided missiles (ATGM5s), missiles for coastal batteries and high-speed target drones.
“This is a strategic joint venture between India and Europe. This joint venture should give the Indian authorities confidence to involve private organisations with ‘Make in India’,” said Antoine Bouvier, chief executive officer, MBDA.
The JV has identified coastal defence as a key priority sector. “Having been in India for a long time, we have seen a clear gap in the coastal defence of the country,” said JD Patil, senior vice-president, head of defence and aerospace, L&T.
While both the partners have been working individually in India on defence offset programmes, they said the JV was strategic in nature. L&T said both companies will bring their experience and expertise to manufacture products that suit the needs of the armed forces.
"The response from the government has been positive and we are looking forward to an increased government confidence in the private sector after this," Naik said.
It could take at least two years before the first product from the joint venture is launched, he said. L&T has spent more than Rs 8 crore in nine defence facilities in the last seven years.
Recently, in an interview with ET, SN Subrahmanyan, deputy managing director and president, had said that while the company is bullish on the defence sector, the pace of decision-making was “frustrating”.