INDUSTRY REPORT

AEROSPACE AND DEFENCE 2018

Compiled for Knowledge partner

November | 2018

I N D E X• OverviewofAerospace&DefenceIndustryinIndia 03• WhyTelangana&AndhraPradesh? 04• DemandDrivers

ExistingconduciveEcosystem 08GrowingbaseofMaintenanceRepair&Overhaul(MRO) 10

• InitiativesandPolicySupportbyGovernment 12• WhyHyderabadasaDestinationforOrganizing

ExposonAerospace&Defence 13

OverviewofAerospace&Defence

IndustryinIndiaEstimatedmarketsizeofAerospace&DefenceisforFY2017-18US$50-55Billion&expectedtogrowtoUS$100Billionoverthenext10years.

Aerospace&DefenceinTelangana&

AndhraPradesh(referasAPinreport)HyderabadisconsideredasthemissilecenterofIndiawithseveralpublicsectordefencelabsandmissilemanufacturingfacilitieslocatedhere.

Telanganaistargetingashareof15-20%marketshareintheaerospaceanddefencesectorinIndia.

Presenceofabout1,000aerospaceanddefencerelatedsmallandmediumenterprisesaddstoitsstrengthinthedomain.

HomefororganizationslikeDefenceResearchandDevelopmentOrganization(DRDO),BharatDynamicsLimited(BDL)andHindustanAeronauticsLimited(HAL)andmultipleR&Dlabs,Hyderabadpresentstheidealeco-system.

A&D

CivilAviation

US$16BILLIOn

CAGR

12-14%

CAGR

08-10%US$42BILLIOn

Defence

Aerospace&DefenceClusterof

Telangana&AP• ProposedAerotropolisatBhogapuram

• UAVClusteratWestGodavari

• BELfacilityatMachilipatna

• AerospaceandDefenceParkatAnanthapuram

• RadarTestBedFacilityatAnanthapuram

• Defencecorridorsbeingplanned

• DefenceparkinEliminedu

• AerospaceclusterinMedakdistrict

Sources:

1)Telangana&AndhraPradeshGovernmentwebsite|2)AndhraPradeshpolicyandstrategy:2015-20

WhyTelangana&AndhraPradesh?(1/4)• MajorstrengthofHyderabadisthepresenceof1,000+(SMEs),someofwhichare

makingpartsofmissiles,launchers,satellites,aircraft,submarineandarmaments

• Somecrucialcomponentsofinter-planetaryvehicleofISRO’sMangalyaanwere

sourcedfromthecity

• Over70%ofAkshayMissile’scomponentsaremadeinthecity’sSMEs

• Hyderabadalsogets30%oftheoutsourcedworkofISROonthespacefront

ExistingPartners

Sources:

1)Telangana&AndhraPradeshGovernmentwebsite|2)AndhraPradeshpolicyandstrategy:2015-20

Recent Investments

• Telanganahasidentifiedaerospace

anddefenceaspriorityindustries

andhastwooperationalAerospace

ManufacturingParksnearAdibatla

region,besidesanaerospacepark

operatedbyGMRadjoiningthe

internationalairport

• TheStateisalsoplanningtosetup

alargeraerospaceanddefence

parkinElimineduandcreateanother

aerospaceclusterwithinthenational

InvestmentsandManufacturingZone

inMedakdistrictwithaninvestmentof

INR 2,500 Crore in next 3-4 years

• DRDOhasproposedaCentreof

Excellenceforsmartmanufacturing

inaerospaceanddefencesectors

inandaroundthecity.Forthis,they

haveplannedinvestINR 64,000

Crore by2025inHyderabad

• TATAAdvancedSystemsLimited

(TASL)hasfourunitsinpartnership

withaerospacegiantsSikorsky,

LockheedMartin,PilatusandRUAG

Aviation.TheyinvestedInR4,000

Croresofar.

• ThecabinoftheSikorskyS-92

chopperthatferriestheUS

PresidentDonaldTrumpwasmade

inHyderabad

• TASLsignedanagreement

withLockheedMartininJuneto

producetheF-16Block

70aircraft,thelatestandmost

advancedversionoftheworld’s

mostsuccessful,combat-proven

multi-rolefighter

• TASLisexecutingamission

controlandcommunicationcenter

foramajormissiledefence

programmeofDRDO

• Hyderabadisexpectedtobethe

baseforTASLandAirbus’sjoint

venturetoreplace the

IndianAirForcefleetof56Avro

aircraftwiththeAirbusC-295

• TASLandBoeingtocollaborate

andexplorepotentialintegrated

systemsdevelopment

opportunities,includingunmanned

aerialvehicles

• Frenchaerospaceanddefence

equipmentmakerSafranElectrical&

PowerSASisplanningtosetupshop

inHyderabad,andhassignedaMoU

withthegovernment.Theunitwillbe

setupatacostofInR52Croreand

isexpectedtocreateemployment

opportunitiesfor250people

WhyTelangana&AndhraPradesh?(2/4)

Sources:

1)Telangana&AndhraPradeshGovernmentwebsite|2)AndhraPradeshpolicyandstrategy:2015-20

AdaniwillstartanewplantinHyderabadtomanufacturecompositeaerostructureintie-upwithElbitSystemsofIsrael,withaninitialinvestmentof$15million,whichwillgoupto$100milliondependingontheorderfromthegovernment

KalyaniRafaelAdvancedSystem(KRAS),ajointventurebetweenIsrael’sRafaelandKalyaniStrategicSystems,willproducethethirdgenerationSpikeanti-tankguidedmissile(ATGM)fortheIndianArmy.ThestateofartfacilityisthebiggestFDIinDefencevaluedabout$1billion

Pratt&Whitney,aleaderinaircraftenginemanufacturinghassetupitstrainingcenterinHyderabad,thethirdsuchaftertheUSandChina

AirIndiaalsorecentlysetupanMROfacilityatHyderabadairporttoserviceitsaircraft

Thecountry’sfirstDefenceincubatorswillcomeupinHyderabad,andwillbehousedatT-Hub,whichhasalreadygotrecognitionasoneofthecountry’smajorcentresfornurturingstart-upsandcreativeideas

TheincubatorwillbefundedthroughtheMinistry’sInnovationforDefence Exellence(iDEX)scheme(TheiDEXwillbefundedandmanagedbyaDefence InnovationOrganisation(DIO).

Initially,acorpusofInR100CrorehasbeencreatedbytwoPSUs-HALandBEL, eachcontributingINR 50 Crore.MoredefencePSUswilljoininwith financialcontributionswhenrequired.Similarly,theMinistryofDefencealsowill extendfundswhennecessary

Telanganaiskeentobecomeaskillhubforaerospaceindustry

GovernmentofTelanganaiskeentoestablishanAviationUniversityin HyderabadandhavebeguntalkswiththeMinistryofCivilAviation

DiscussionsarealsogoingonforsettingupofspecializedAerospaceSchools/ CentreofExcellence(COE)inHyderabad,tomeetthegrowingdemandsofA&D industriesinHyderabad.ThestategovernmenthassignedaMoUwithUK-based CranfieldUniversitytocreateanaviationuniversityinHyderabad

Sources:

1)Telangana&AndhraPradeshGovernmentwebsite|2)AndhraPradeshpolicyandstrategy:2015-20

WhyTelangana&AndhraPradesh?(3/4)

WhyTelangana&AndhraPradesh?(4/4)

Andhra Pradesh

ExistingPartners UpcomingPartners

Sources:

AndhraPradeshpolicyandstrategy:2015-20

KeyHighlights• 6existingairports;1majorand3no-

frillsairportsplanned

• EasternnavalCommandHQinVisakhapatnam

• PresenceofISRO,HindustanShipyard,BharatElectronics,andotherdefencePSUs

• UpcomingnavalshipbuildingfacilitybyRelianceDefenceatRambilli,Visakhapatnam

• UpcomingweaponsintegrationfacilityinWestGodavaridistrict

• DedicatedA&DparknearPalasamudram,Anantapurdistrict

• Missiletestingfacilityplannedinnagayalanka,Krishnadistrict

• World-classMROfacilityandaircargocomplexplannedatproposedBhogapuramMegaAerotropolis

KeyPolicyTargets2020–A&DIndustry

InR20,000 Crore

5,000 newJobs

• MajorClusters/Parks

• AerospaceandDefencePark(onPPPbasis)inAnantapurandChittoor/nelloredistricts

• World-classMaintenance,RepairandOverhaul(MRO)facilityasapartofproposedBhogapuramAerotropolisnearVisakhapatnam

• AirCargocomplexnearisakhapatnam

• AerospaceandDefenceindustrialparkinPalasamudram,Anantapur

Key Initiatives• EstablishmentofAerospace&

Defenceclustersforecosystemdevelopment

• PermissiontoAerospaceandDefencemanufacturingindustryfor24x7(threeshiftoperations);employmentofwomeninnightshift

• A&Dmanufacturingindustrydeclaredtobea‘PublicUtility’undertheIndustriesDisputesAct,1947

•

And

hra

Pra

desh

T-Works,GovernmentofTelangana’sinitiative,actsasaprototypingcentreforelectronics,semiconductorsandhardwarestart-ups

• At250,000sq.ft.,T-Workswillbeoneoftheworld’slargesthardwareprototypingfacilities

• Phase-1consistsof~70,000sq.ft.areaandequipmentworthInR10Crore

ExistingPartners

Sources:

1)Telangana&AndhraPradeshGovernmentwebsite|2)AndhraPradeshpolicyandstrategy:2015-20

ExistingconduciveEcosystem - Growing Electronics Industry Hyderabad,currently,ismarchingtowardsestablishingitselfasoneoftheleadingelectronichubs globally.Ithousesover250companies,bothlargeandsmallwhichtogetheremploygreaterthan50,000professionals

By2020,TelanganaStatetargetstoachievemorethanInR120,000CroreworthofITexportsbygrowingataCAGRof16%andcreatemorethan4Lakhofdirectemploymentand20Lakhofindirectemployment

LaunchedIoTPolicy2017tocreateanatmosphereconduciveforIoTspecificbusinessesandmanufacturingunitstothriveintheState

Attractinvestmentsworth10,000Crore&generatedirectemployment

Note:ThestatisticswereprovidedbyDirectorofSoftwareTechnologyParksofIndia(STPI)andDevelopmentCommissioner,SEZ)

Growth in IT/ITES Exports %

All India (Projected by NASSCOM) 7 to 9

Telangana 9.32

DemandDriver(1/4)

Sources:

1)Telangana&AndhraPradeshGovernmentwebsite|2)AndhraPradeshpolicyandstrategy:2015-20

ExistingconduciveEcosystem - Growing Electronics Industry

Cyient–globalprovidersofengineering,networks,digitalandoperationsmanagementsolutions–signedanMoUwiththeTelanganaAcademyforskillandKnowledge(TASK)

Itwillbebasedon“train-and-hire”modelforfourth-yearstudentsinTASKregisteredengineeringcolleges

Governmentisalsoprojectingtier2&3citiesasanattractivedestinations

forstartupsandtechcompaniesinthis

sectorv

TheTelanganagovernmenthasidentifiedfivelocations-Warangal , Karimnagar, Nizamabad, Khammam and Mahabubnagar

ThegovernmenthassanctionedInR25CroreineachofthesetownstosetupIThubs

WarangaltobethenextbigtechhubafterHyderabad,onthelinesofBengaluru-Mysuru

Cyienthasalreadysetupacampus,whereitwillemployaround1,000peopleinphasesinWarangal

TechMahindratoo,willbesoonsettingupacampusinWarangalandwillbeemploying500ITprofessionals

Thestategovernmentisinadvancetalkswith3-4

moretechmajorstosetupcentresinthecity

andhopestoformalizetalksandhavethemsetup

operationsbytheendofthisyear

DemandDriver(2/4)

Sources:

1)EconomicTimes|TheHindu|TelanganaToday

RawMaterialDefencePSUMidhanieyeingtocutdependencyonChineseimports.• TheMishraDhatunigam(Midhani)LimitedisreducingdependencyonChinafor

thestrategicmetalsusedindefence.

• DetailedprojectReportfortheproposedjointventurewithnalcotomanufacturealuminumalloysatnellore.

• IthaspartneredwithanotherPSUnMDCLimited,isindiscussionswithVietnam-basedMasanResourcestoacquireminoritystakeinaTungstenmine.

Centreofexcellencemootedforworkoncomposites.• TelanganaandAndhraCompositesManufacturersAssociation(TAACMA)and

FRPInstitutewiththesupportofTelanganagovernmenthasorganizedthetwo-dayinternationalconferenceinHyderabad.

• Thiscentreofexcellencewillbeworkinginthefuturisticareas-smartcomposites,selfdiagnosticcompositesorselfhealingcomposites,nanocomposites,leancomposites&highperformancecarbonfibers.

• Defenceandaerospacesectorisoneofthe14thrustsectorsidentifiedforgrowthbytheStategovernment.Acompositemanufacturingclusteron123acreswasbeingsetupinIbrahimpatnam

F-16productioncanmakeIndiafighterjetexporthub:LockheedMartin• GlobalaerospacegiantLockheedMartinintendsltomanufacturecustom-built

F-16fighterjetsinIndiawillmakethecountryanexporthubandgiveitaccesstoanestimated$165billionfighteraircraftmarketoverthenextfewdecades.

• TataLockheedMartinAerostructuresLimited(TLMAL),ajointventurebetweenTataAdvancedSystemsLimited(TASL)andLockheedMartin,inauguratedIndia’sfirst-of-its-kindmetal-to-metalbondingfacilityatAdibatlainHyderabad.

DemandDriver(3/4)

Sources:

1)TelanganaToday,Livemint

2.GrowingbaseofMaintenanceRepair&Overhaul(MRO)GMR Aero Technic, (GATL), a 100%, a subsidiary of GMR Hyderabad International Airport Ltd (GHIAL) has received the Federal Aviation Administration (FAA) approval on popular Narrow Body Aircraft (B737 and A320), Making it an authorized MRO services provider for all C checks for FAA registered B737/A320 aircraft and for NDT (Non Destructive Testing) inspections

• Currently,GATLholdsthelargestshareofthemarketforoutsourcedairframeBaseMaintenanceMRObusinessinIndia,andapprovedbythefollowingcertificationsfromacrosstheglobe

• GATListhefirstthirdpartyMROintheSouthAsiaregiontohavecarriedoutC-checksonthelatestAirbusA320neovariant

• OnlyAuthorizedServiceFacilityforBombardierQ400aircraftintheregion

• GATL’sotherfocusareasincludeDefenceMRO,smallercomponentmaintenanceandvariousspecializedservicesalongwithaircraftliverypainting

• Embraer,AirIndiatosetupMROfacilityinSecunderabad

• BrazilianaerospacemajorEmbraerhaspartneredwithstate-ownedAirIndiatosetupamaintenanceandrepairMROfacilitytomaintainitsbrandofprivateandbusinessjetsintheentireSoutheastAsianregion

• TheproposedfacilityisexpectedtocomeupattheBegumpetairportinSecunderabadinTelangana

DemandDriver(4/4)

• TelanganagovernmentispreparingapolicyforDefenceandAerospacesector

• TheTelanganagovernmenthastakena

numberofinitiativestodevelopaDefence

&Aerospacesegmentbydevelopingan

exclusiveHub,AeroSkillsAcademyin

collaborationwithAerocampusAquitaine,

FranceandAerospaceIncubationCentrein

collaborationwithIIT,Hyderabad

• AerospaceandPrecisionEngineeringSEZ

atAdibatla:TheAerospaceSEZatAdibatla,

IbrahimpatnamMandalofRangareddyspread

of500acresisfullyfunctional

• Telanganagovernmentisproposingtoset

upthreemoreDefenceandAerospace

parksontheoutskirtsofthecityhereover

thenextfouryearswithaninvestmentofInR

2,500Crore

AndhraPradesh

• Attractatleast4anchorunitinvestments

ofoverInR1000Croreeachinthesectorin

thepolicyperiod

• Attractordersforatleast10%ofalloffset

obligationsdischargedbycompaniesinIndia

overthepolicyperiod

• GoAPaimstoattractatleastoneDPSUinto

APinthenext5years

• FiscalIncentivesprovided:

1.TaxIncentives

• netVAT/CST/SGSTreimbursements

forMSMEandlargeA&Dunits

shallbeasperthenewIndustrial

DevelopmentPolicy2015-20

• 100%exemptionfromEntryTax

on‘Plant&Machineryandcapital

goods’foraninitialperiodof3

years(orpolicyvalidityperiod,

whicheverisearlier)fromthedate

ofcommencement

• Foraircraftswhicharebrought

inspecificallyforMROinAndhra

Pradesh,100%reimbursementof

VAT/CST/SGSTonallinputmaterial

(excludingAviationTurbineFuel)

2.CapitalSubsidy

• AnchorunitsubsidyofInR10Crore

eachshallbeofferedtofirst10

aerospaceand/ordefenceOEM

enterprisesestablishedduringthe

policyperiod

InitiativesandPolicySupportbyGovernment(1/2)

Sources:

1)TelanganaToday,Livemint

Why Hyderabad as a Destination for Organizing Expos on Aerospace & Defence

Why Hyderabad?• HyderabadisthemissilecenterofIndiawithhometopublicsectordefencelabsandmissilemanufacturingfacilitieslocatedhere

• Thepresenceofabout1,000aerospaceanddefencerelatedsmallandmediumenterprisesaddstoitsstrengthinthedomain.AsthehometocampusesoforganizationslikeDefenceResearchandDevelopmentOrganization(DRDO),BharatDynamicsLimited(BDL)andHindustanAeronauticsLimited(HAL)andmultipleR&DlabsHyderabadpresentstheidealeco-system

• IndustryleaderssaythatthecityhasbecomethegroundforimplementingtheMakeinIndiainitiativeasseveralglobalgiantshavejoinedhandswithIndianplayerstosetupmanufacturingunits

• HyderabadisawellconnectedlocationforExhibitorsaswellasVisitors

• Roadconnectivity:ThedensityofnotifiednationalhighwaysinTelanganais2.90km/100sq.kmagainstthenationalaverageof2.84km/100sq.km

• Strongrailwayconnectivity:TheStatealsohasanintegratedrailwaynetworkwithrailwayterminalssuchas-nizamabad,Mahbubnagar,KammaReddy,Bodhan,Jedcherala,Gadwaland,Balanagar

• Accesstoworldclassairportfacility:RajivGandhiInternationalAirport(RGIA),Shamshabadisoneofthelargest7modernairportsinIndia

• GovernmentofTelanganahasenteredMoUwithMinistryofCivilAviationandAirportsAuthorityofIndiafordevelopmentofsmallairportsatKothagudemandWarangal

• GovernmentofTelanganaisrankedno1inEaseofDoingBusinessgivenbyDepartmentofIndustrialPolicy&Promotion(DIPP)andWorldBank

• StateofTelanganahasuniquegeographicaladvantage.ItgeographicallyplacedincloseproximitytomajorconsumermarketssuchasBangalore,Mumbai,Kolkata,Chennaietc.

3.PatentCost/QualityCertificationcostreimbursement

• Governmentwillprovidefinancial

assistancelimitedto75%ofthecost,

subjecttoamaximumofInR25Lakh

forobtainingpatentregistration

and50%ofallcharges,subjectto

amaximumofInR5Lakhpaidfor

obtainingqualitycertification

4.PromotionofDefencePublicSectorUnitsandR&DCenters

• R&Dinvestmentsindefenceabove

InR10Crorewouldbeeligiblefora

10%subsidyoninvestments

subjecttoamaximumofInR10

Croreperinvestment

InitiativesandPolicySupportbyGovernment(2/2)

Sources:

APGovernmentwebsite

Contact:SambitKumarMund|+917337518888

HYDERABADInTERnATIOnALTRADEEXPOSITOnSLTD.

TradeFairOfficeBuilding,FirstFloor,HITEXExhibitionCentre,Izzatnagar,Hyderabad-500084

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