Eye on Defence Oct 2016

Contents title

Contents subjects

Dear readers,

In the recent past we have witnessed improved Indo-US defence relations at the back of increased dialogue between the two government. Signing of some key defence programs under the FMS agreement has opened doors for a more strategic oriented relations . The first article for this issue

focuses on the subject of changing dynamics in the Indo-US relations. We have covered key agreements under discussion between the two nations, details on the foreign military sales (FMS) program, initiatives under the DTTI and a list of few pathfinder projects, which can benefit from the change of events. In addition, we have tried to provide an insight into the implications of these new developments from an Indian standpoint.

Our second article is focused on Unmanned Aerial Vehicles (UAVs). The article throws light on the product description, industry capabilities and overall market size of UAVs from a global market perspective. In product description we have tried to categorize the UAV into sub-segments and list out various UAVs currently employed by the Indian forces or targeted in the future. Within local industry capabilities we have detailed out the private players who have specific products of their own. An estimation of the market has also been done based on various RFIs/RFPs released and several large ticket programs to be announced in future.

A new addition to our magazine this quarter is the global A&D perspective focused on US companies for the current version in terms of key themes that drove their business and various new developments that were observed in recent times.

Among the regular sections, we have industrial license applicants, RFIs/RFPs released, new projects and investments, joint ventures and alliances, country-level deals and the latest buzz in the industry.

I hope you find this issue useful. It has been our constant endeavor to make this publication increasingly relevant for you, and we will appreciate your comments and suggestions in this regard.

K. Ganesh Raj Partner and Leader

Contents

Introduction 1

Indo-US Defence Relations and DTTI 2

Unmanned Aerial Vehicles (UAVs) 7

Request for Information 15

Request for Proposal 16

List of Industrial Licenses (ILs) filed 21

New projects/investments/contracts 22

JVs and alliances 24

Country-level deals and initiatives 26

Industry buzz 27

Key themes from leading US based A&D players 30

Global industry buzz 33

Analysis of M&A trends 36

Eye on Defence

October 2016

2 | Eye on Defence

Indo-US relations have their distinct dynamics and imperatives. The ties between two countries have witnessed rapid expansion in different fields from trade to science, technology and defence in the recent past. In 2001, both countries affirmed their commitment to transform the bilateral relationship and build inherent strength. The civil nuclear energy cooperation, the new “Framework for India-U.S. Defense Relations” and the resulting intensification in defence trade, joint exercises, personnel exchanges, collaboration and cooperation in maritime security and counter-piracy, and exchanges between each of the three services were inked in 2015. The two countries were collaborating in other sectors also apart from defence.

Foundational agreementsCurrently, Indo-US bilateral relations have developed into “global strategic partnership” and their defence relationship has now been extended till 2025. The latter is evident from the recent outcome of the Indian PM’s visit to the US, which is the “third major bilateral summit”, after September 2014 and January 2015. Apart from securing entry into Missile Technology Control Regime (MTCR), the US has assured full support for the membership of Nuclear Suppliers Group (NSG). A significant achievement has been the recognition of India as a “major defence partner” by the US and its readiness to share defence technologies to a level commensurate with that of its closest allies and partners. The US has also re-affirmed its support for India’s early membership of the Australia Group and Wassenaar Arrangement.

Under the Defense Technology and Trade Initiative (DTTI), the US has made proposals in specific areas for participation in multinational operations, expanding two-way defence trade, expanding collaboration on missile defence, conducting exchanges on defence strategy, increasing intelligence cooperation and to co-manufacture and co-develop modern defence equipment with India. Both countries have signed logistics exchange memorandum of agreement (LEMOA) and are moving toward signing the other two “foundational agreements” that will facilitate cooperation and ease the transfer of high-technology from the US. These are:

Indo-US Defence Relations and DTTI

LEMOAThe standard agreement was modified to be named as the LEMOA. It will provide access to supplies, spare parts and services from each other’s land facilities, air bases and ports, which can be reimbursed and it does not provide automatic access to the use of military bases.

Communication and Information Security Memorandum of Agreement (CISMOA)The CISMOA will enable India to get encrypted communications equipment and systems allowing military commanders to communicate with aircraft and ships through a secure network, as the advanced radio needed for an aircraft to talk to the submerged submarine is protected by CISMOA. The US insists on CISMOA as a condition for supplying this equipment because it is afraid that its advanced technology may be leaked to India’s other defence partners, especially Russia. Just like LSA was renamed to LEMOA, CISMOA is expected to be renamed to COMCASA — or Communications Compatibility and Security Agreement.

Basic Exchange and Cooperation Agreement (BECA)The BECA would provide India with topographical and aeronautical data and products, which will aid geospatial intelligence, navigation and targeting. This also relates to digital mapping especially accurate targeting with long range missiles.

The other relevant agreements are: • The Navies of both sides will continue discussions

to identify specific areas for expanding maritime cooperation. Inaugural Maritime Security Dialogue held in May 2016; second one expected later this year.

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• Vehicle-based mines scattering system

• Scorpion mutation bomb with in-built sensors that allow command centers to accurately target enemy convoys

• Micro-observers or unattended ground sensors for deployment on the border

• MH-60R helicopters and drones

• Hot-engine technology for indigenous light combat aircraft Mark II

• Signature Aperture Radar that can penetrate thick forests

• Stealth-coating technology that deadens radar images for minimum radar profile and maximum survivability in hostile conditions

• Long-endurance high-altitude Global Hawk UAV

• Hand-held Unmanned Ariel Vehicles (UAVs) RQ-11, “Raven” for tactical surveillance

• Specialized surveillance and intelligence gathering equipment “roll-on roll-off” for the C130-J transport planes

• Mobile Electric Hybrid Power Sources (MEHPS), a non-grid-tied smart power system with output ranging from 300W to 800KW, to augment traditional generators on the battlefield

• Uniform Integrated Protective Ensemble, a configured head-to-toe individual fighting system, for land-based soldiers

• High-end counter-IED technologies

• 30-40mm AA gun

Identified pathfinder projectsHowever, in terms of tangible deliverables, the two countries have identified and formalized “pathfinder projects” for co-production and co-development understandings and are likely to be ice-breakers. The “pathfinder projects” include:

• Next-generation Raven mini-unmanned aerial vehicles (also called micro-UAVs) that infantry platoons can launch for battlefield surveillance. The AeroVironment RQ-11 Raven, 10 km range, hand-launched surveillance UAV, which was inducted into the US army in 2001 and is currently used by 23 countries including Pakistan and Saudi Arabia are most widely used UAV

• Knowledge partnership in defence studies between the US and Indian National Defence Universities will help shape the next generation of military leaders.

• The agreement will facilitate cooperation in defence research and development

• Agreements to help enhance joint military exercises and increased cooperation in cyber security.

• It will help to cooperate on India’s efforts to establish a Defence Industrial Base (DIB) in India, through initiatives such as “Make in India”.

• It should deepen collaboration to combat the full spectrum of terrorist threats.

Defence Trade and Technology Initiative (DTTI)DTTI, launched in 2012, is an unprecedented joint endeavor that brings sustained leadership focus to the bilateral defence trade relationship, creates opportunities for the US and India to develop new areas of technology cooperation in the defence sector including co-production and co-development, and fosters more sophisticated science and technology cooperation between the two countries.

DTTI aims at enhancing the existing relationship under the Defence Policy Group, which lays out the path for future defence cooperation and will be significant, since it could take the Government’s “Make-in-India” initiative further. In September 2014, both governments decided to establish a task force to expeditiously evaluate and decide on unique projects and technologies, which would have a transformative impact on bilateral defence relations and enhance India’s defence industry and military capabilities. The US is said to have offered India some hi-tech items of military hardware for co-production and co-development under DTTI. Although the details of technologies for the co-development and co-production on offer are not known; the following is the unconfirmed/probable list:

• Shift of production line of Boeing twin-engine F-18

• Shift of production line of Lockheed Martin single-engine F-16

• Co-development of Javelin, an infra-red guided missile

• Electro Magnetic Aircraft Launch System (EMALS) for aircraft carriers

• M777 155 mm Howitzer

4 | Eye on Defence

for tactical surveillance. AeroVironment developing the next generation Cheel UAV along with Dynamatic Technologies. The prototype is expected to be ready in 12 months.

• Roll-on, roll-off kits for US-supplied C-130J Super Hercules transport aircraft, which are changeable aircraft interiors that allow the C-130J to be quickly configured for different missions such as para-dropping, cargo-carrying, intelligence surveillance and reconnaissance and medical evacuation.

• Mobile electric hybrid power (MEHP) non-grid-tied smart power system with output ranging from 300W to 800KW to augment traditional generators on the battlefield. Source for various utilizations, which could potentially be scaled up into an “air-independent power system” for submarines.

• Uniform Integrated Protection Ensemble Increment II or protective clothing for soldiers in nuclear, chemical or biologically contaminated battlefields.

• General Atomics Electro-Magnetic Aircraft Launch System for India’s second indigenous aircraft carrier;

• Possible cooperation on development of advanced jet engine technology.

• Digital Helmet Mounted Display (DHMD): Provides the necessary operational data/tactical intelligence through the helmet display

• Joint Biological Tactical Detection System (JBTDS): System to detect and identify biological warfare agent attacks

Indian requirement projectionsIndia has requested for detailed proposals and license requirements under the bilateral DTTI for the undermentioned key advanced technologies:

• Hot-engine technology for indigenous light combat aircraft Mark II - This technology allows fighters to operate in hot weather conditions such as in deserts without any possibility of an engine failure.

• Radar system equipped with Signature Aperture Radar that can penetrate thick forests.

• Stealth-coating technology - The coating deadens radar images and would give Indian jets minimum radar profile and maximum survivability in hostile conditions.

• Long-endurance high-altitude UAV - Equipped with synthetic aperture radar, the drone can fly at an altitude of 65,000 feet, stay air-bound for more than 14 hours and survey up to 40,000 sq. km terrain in a day.

• Textron-manufactured Scorpion mutation bomb, used for protecting military installations.

• India has made a renewed pitch to acquire armed drones from the US during defence minister Manohar Parrikar’s visit, to meet a requirement of the air force for a stealth cross border strike option.

Foreign Military Sales (FMS)Most of the projects under DTTI are likely to be under government-to-government (G2G) deal, also known as Foreign Military Sales (FMS) program or inter-governmental agreements. Moreover, in cases where there is an urgent strategic and operational need for particular weaponry to meet immediate requirements of the defence service, then G2G seems to be a preferred route. A comparison between the competitive procurements and those through G2G clearly depicts that in recent years most of the deals by India have taken this route. Rather out of the total overall defence procurements initiated by India around 70% of them have been through G2G. (Refer Fig.) The Indian Ministry of Defence is adopting this route to make up for the shortfall in overall deficiency of equipment and preparedness profile of the services.

The G2G procurements, which account for 70% of all procurements, have mainly been from three countries — Russia, the US and Israel. However, the US has the major portion of the G2G pie. India, till date, has procured weaponries amounting approximately US$22 billion through the G2G route and more are expected to be signed in the coming years. The share of these three countries is depicted in figures. The bilateral trade between India and the US

5Eye on Defence |

stood at US$62 billion in 2013–14; the US is targeting to increase it eight fold to US$500 billion by 2025. According to major defence contracts signed during the last three years, the share of the US is 82% as compared to 11% of Russia.

The defence procurement from the US over the last one decade has been to the tune of around US$15 billion, both through the FMS and Direct Commercial Sales (DCS) route. The equipment and platforms procured by India from the US includes aerial cargo and surveillance platforms, land-based radars, ship-based helicopters, weaponry, engine technology, and one amphibious transport dock (ex-USS Trenton), heavy lift and attack helicopters. The industry trends indicate that this trade could touch US$25 billion over the next decade. The projected deals under the FMS program in coming years could include Hawkeye E-2D aircraft, self-protective suite, additional Harpoon block II missiles for P-8Is, special operating forces equipment, Aegis Missile Defence System, multi-role, new generation carrier-based fighter aircraft, ANTPQ 37 fire finder counter battery radars, submarine deep sea rescue vehicle case.

Differences in focusIndia being the top importer of defence item makes it attractive for defence manufacturers to do business; however, the significant import bills and foreign dependency are the issue of concern. India’s quest for self-reliance in defence and its initiative “Make in India” intends it to focus on research and development and in-house manufacturing. In the last two years the MoD accorded Acceptance of Necessity (AoN) for defence acquisition schemes for more than US$33billion (INR2,000 billion). Out of these more than 80% fall in “Make in India” categories, for which RFP (Request for Proposal) will be issued to only Indian Vendors. Therefore, it leaves very limited options for Foreign OEMs but to collaborate or co-produce with Indian industry through suitable technology transfer or technical support or joint venture arrangements with the Indian Industry. The Indian defence industry has been trying their best to build a strong defence industrial base but is limited, mainly due to lack of technology. Hence, transfer of technology comes into picture, where present “buyer-seller” relationship will change to co-development and co-production model encouraging high-technology joint research and development.

Exhibit1. G2G vs. competitive procurements in last decade

Source: SIPRI and Complied by Q-Tech synergy

G2G Procurement

70%

Competitive Procurement

30%

Total overall

procurement

Exhibit 2. Percentage share of countries in G2G Contracts in last decade

Source: Complied by Q-Tech synergy

Russia, 36%

Israel, 9%

US, 55%

Percentage share

6 | Eye on Defence

The US’ recognition of India as a “major defence partner” has made the US defence companies eyeing the Indian market for prospective multi-billion dollar ”Make in India” deals. The US defence majors are ready to offer and make their products in India; hence, will boost the Indian defence industry’s integration into the global supply chain of major original equipment manufacturers. On the one hand, the US will encash the opportunity in the Indian defence market, on the other hand, Indian private and public players will enjoy the participation in manufacturing and share in technology. With the US looking more at trade and India at technology, the initiative will not only bring high technology but also upgrade the Indian defence manufacturing sector by familiarizing Indian companies with best global practices, while giving a boost to Indian defence exports.

Implications for IndiaIndia is diversifying its acquisition sources beyond Russia to western countries with the aim that future defence acquisitions must simultaneously lead to a transformative change in the country’s defence technology base and manufacturing prowess. However, none of the recent deals with the US have included transfer-of-technology (ToT) clauses.

The Government’s “Make in India” campaign is to co-manufacture and co-develop weaponry, rather than simply buying them from the US. However, the US’s rigid export control regimes, which lays conditions for technology transfer, are too time consuming and may not be acceptable. Although DTTI was set up in 2012 to bridge this gap and to jointly identify opportunities for defence cooperation, not much progress has been made in this direction. The other stumbling block is the US’ insistence on the FMS route, which becomes a single vendor case without any competition.

The FMS route is ideal in respect of high-tech, low volume systems, which no other country possesses or is ready to offer. This route is also better for complex weapon systems, since India can get them duly integrated and configured. Although the FMS route has the additional advantages of fixed prices, sovereign guarantees and after sales support but it should be always followed as an exception rather

than the rule. It should be an option for the acquisition of weapons and equipment for urgent needs of the military and not be taken as an escapism mechanism of tedious competitive bidding.

Through these new initiatives and agreements the ties between these two nations will only become stronger because of the huge economic potential of both the countries.

References• “India keen to acquire US ‘predator’ armed drones after entry

into the MTCR,” The Economic Times, 27 August 2016, via Factiva

• “India’s hopes of procuring three Boeing C-17 aircraft appear bleak,” Business Line, 30 November 2015, via Factiva

• “US set to be India’s biggest arms supplier,” The Times of India, 13 July 2015, via Factiva

• Indian Ordnance Factories website• “Indo-US Defence Agreement,” Defence Pro-Ac, http://www.

defproac.com/?p=1934, accessed 5 September 2016• SIPRI Databases, https://www.sipri.org/databases, accessed 12

June 2016

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Unmanned Aerial Vehicles (UAVs)

Unmanned Aerial Vehicles (UAVs), also referred to as Drones and Remotely Piloted Vehicles, (RPVs) and more recently termed as Unmanned Aircraft System (UAS), can be described in simple term as aerial vehicles, which operate without a human pilot and is either autonomous or remotely operated. The principal aim of UAVs is real-time reconnaissance and surveillance. In addition, UAVs have varied uses that include intelligence collection, power line and pipeline inspections in inaccessible regions or high altitude terrain, surveillance and data relay during natural calamities, disaster management, border patrol and trans-border refugee tracking, border monitoring and maritime surveillance and coast guard operations, detection and monitoring of radiation leaks or oil spillage (both at sea and along the coastlines), land surveying, film making, inspection of labor forces.

The modern military UAVs, known as Unmanned Combat Aerial Vehicles (UCAVs), are armed versions and have been equipped with weaponry (missiles and bombs) keeping in mind the future network-centric battlefield scenario. The UCAV have a range of capabilities and have entered the domains of electronic attack, strike missions, suppression and destruction of enemy air defence, communications relays, combat search and rescue, and derivations of these themes. These will be the major force multipliers in the future battles, since they are not only economical to develop and maintain the conventional war fighting machines but also reduce the risk of human life. Well-known combat UAVs include Predator, Harop and Eagle. Due to their capability of seamlessly integrating all three key areas of defence

systems encompassing the sensor, shooter and command and control network, the military role of UAV is growing at an unprecedented pace.

Market structureThe diversity of applications has resulted in the development of a wide range of different types of UAV. However, currently, there is no accepted classification system for UAVs. These are typically grouped into three categories based on range, which includes:

• Long range: High Altitude Long Endurance (HALE), Mid Altitude Long Endurance (MALE), Vertical Take Off & Landing (VTOL).

• Mid-range: Tactical UAV (TUAV), VTOL.

• Short range: Small UAV (UAVs), Micro UAV (MUAVs), VTOL.

Furthermore, another way of classification and tierization can be on the basis of roles:

• Control

• Aerial targets and decoy

• Surveillance/reconnaissance

• Combat

• Altitude

The diagram below shows various classification with examples.

High Altitude Long Endurance

but Low Obserable

High Altitude Long Endurance

UAV (HALE/HAE)

Medium Altitude Long Endurance

UAV (MALE)

Low Altitude Long Endurance

UAV

Small/Micro UAV

Tier III RQ-170 Centinel

Tier II+ Global Hawk, RQ-4 PA-B

Tier II MQ/1

Predator, IAI Heron

Tier I IAI Searcher, RQ-2 Pioneer

Tier Netra,

Batmav

A

L

T

I

T

U

D

E

8 | Eye on Defence

The global UAV market is highly compact and consolidated with several companies; however, the major share still lies in the hand of large OEMs. GA-ASI (the US), Northrop Grumman Corporation (the US), Aero Vironment Inc. (the US), Elbit Systems Ltd. (Israel), and IAI Ltd. (Israel) are key players for UAVs accounting for more than 57% of the total market share. Apart from these, companies such as Lockheed Martin (the US), Boeing (the US), BAE Systems Plc (the UK), Textron (the US), Aeronautics Ltd. (Israel), Safran SA (France), SAAB AB (Sweden), Thales Group (France), TAI Inc. (Turkey), and Aviation Industry Corporation of China are other prominent players in the UAV market. Country-wise, the North American, APAC and the Middle Eastern markets are expected to contribute largely in terms of procurement and manufacturing, among the analyzed regions. The emerging economies in the Asia-Pacific region, Latin America, and Africa are expected to be the prospective markets. Rather, after China and Japan, India is emerging as one of the key markets for UAVs in the Asia-Pacific region. The UAVs range in cost from a few thousand dollars to millions of dollars, and vary in size from a Micro Air Vehicle (MAV) weighing less than one pound to large aircraft weighing over 40,000 pounds. A large growth is expected from the Asia-Pacific region, especially from China and India, who are investing in these highly useful aircraft on a massive scale, either by buying foreign designs or by producing indigenously.

As far as India is concerned, UAVs form a critical layer in the integrated defence system that the three Indian Defence Services are now implementing in coordination with one another. Constrained for a long time by technical limitations

of the defence industry and by chronic delays of Defence Research and Development Organization (DRDO) projects, India was forced to import off-the-shelf models, mostly from Israel, since late 1990s.Although UAVs have been in service with the three defence services in small numbers since 1990s; however, their mass scale adoption and integration with existing and projected fighting systems has begun in earnest only in the last couple of years. Therefore, we can say that the Indian UAV market is still in its early stages of lifecycle with robust growing prospects.

The Indian Army (IA) was the first to acquire UAVs followed by the Indian Air Force (IAF) and Indian Navy (IN). Currently, the inventory of approximately 200+ UAVs of the Indian Armed Forces comprises mainly of Israeli Searcher and Heron in reconnaissance role and Harpy Fire and Forget Ground Attack Drones. Israel is the leading supplier for UAV systems and related equipment in the Indian market as of now. Last year, the Government of India approved another purchase from Israel for ten armed Heron TP UAVs worth US$400 million for the IAF; but, the deal is still to be inked. However, with increasing requirements and procurements of UAVs by India’s Defence Forces, players from countries such as the UK, France, Russia and Germany are expected to tap the Indian market in coming years.

Apart from the foreign procurement, the Armed Forces have also inducted DRDO developed indigenous drones “Lakshya” and ”Nishant”. The Indian military is employing these inducted UAV systems for operations, disaster management and aid to civil power. DRDO has also supplied around 25 Netra micro UAVs to the Paramilitary Forces.

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With the growing importance of UAVs in the 21st century battlefield, the Indian Armed Forces are looking forward to reduce the high ratio of manned platforms from present 95% to 50% by 2027 and beyond in a phased manner as depicted below:

Existing capabilitiesApart from outright purchase from Israel in the last few years, there were indigenous development efforts, which have met limited success. Earlier only Government agencies such as DRDO (the major agency involved in the development of UAVs), National Aeronautics Laboratory (NAL), Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL) had been involved with the development of UAVs for the defence services. Till date, DRDO has developed just two UAVs, known as ”Lakshya” and ”Nishant”. However, the indigenous development of nearly two decades old Nishant UAV program worth INR0.9 billion faced a major setback when the Indian Army lost its entire fleet of Nishant drone to a series of accidents even before entering full-fledged production in November 2015. While four of the UAVs were inducted in 2011 after a long delay, at least three are confirmed to have crashed. The Army has cancelled any further orders. The DRDO is now working on an indigenous MALE drone Rustom and the short-range Pawan and Gagan with help from Israel Aerospace Industries. Moreover, in the pipeline is development of Rustom-II, along with an aeronautical test range at Chitradurga, which was approved in February, 2011, at a cost of INR16.5 billion with completion date slated for February, 2017. Various other UAV programs such as AURA and Solar UAVs are also in the pipeline.

Exhibit 3. Manned vs Unmanned Aero platforms: India

Source: Q-Tech synergy

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012-17 2017-22 2022-27

Manned Unmanned

15%30%

50%

50%

70%

85%

Indigenous DRDO programs underway

Indian Air Force Three Rustom UCAVs and one ground station at a cost of US$60 million

Two stealth UCAVs called Autonomous Unmanned Research Aircraft (AURA) and one ground station for US$75 million

30 Nirbhay UAVs

Unspecified numbers of Lakshya-II remotely piloted high speed target drones at a cost of US$531,687 per unit

Indian Navy Three Rustom UCAVs and one ground station for US$60 million with 12 more to come

10 MALE Rustoms at a cost of US$225 million

Four Pawan mini UAVs for US$33 million; 50 air- and ship-launched Nirbhay UAVs

Three rotary UAVs at a cost of US$232 million; unspecified numbers of Netra micro UAVs for US$50,000 per unit

Gagan tactical UAVs at a cost of US$55 million with help from Israel

Indian Army Three Rustom UCAVs and one ground station at a cost of US$60 million and 12 more in the future

10 Rustom-2 UCAVs for US$342 million

12 Nishant UAVs at a cost of US$5 million each

Three hybrid mini-UAVs and one ground station for US$350,000

10 | Eye on Defence

Private industry participationThe domain of UAVs is emerging as a focus area for indigenous military development and production efforts. The domestic UAV programs are serving as a draw for the private sector with participation from both medium and small scale enterprises (MSME) as well as large companies. The private sector has also shown a keen interest in the design and development and production of UAVs. The drive toward formation of JVs with some major global UAV manufacturers substantiates this fact. Currently many SMEs such as Speck, Alpha Design, Dynamatic Technologies and Coral Digital Technologies Pvt. Ltd. are building drones in partnership with Israeli firms and NAL; while some companies such as Anjani Technoplast, Idea Forge, Mukesh Kumar Udyog, Taneja Aerospace and Aviation and Jubilant Aeronautics have taken steps to develop UAVs on their own or with technology collaboration with foreign firms. Some specific details as under:

Dynamatic Technologies LimitedThe company designs and builds highly engineered products for automotive, aeronautic, hydraulic and security applications. It is India’s largest private sector company, which develops exacting airframe structures and precision aerospace component. It has developed Wing and Rear Fuselage of the LAKSHYA UAV. Their domain is Airframe Structures and Precision Aerospace Components, for all UAVs including Patang VTOL UAV.

Dynamatic Technologies has teamed with US company Aero Vironment, Inc. to manufacture a next-generation micro-UAV called the Cheel. The company also has an agreement with Israel’s Bluebird Aero Systems to manufacture and market mini and micro tactical, unmanned aerial vehicles in India. The company is participating in 95 UAVs tender for IAF and IN and also for man-portable mini UAVs for IA.

Aurora Integrated System (AIS)The company is developing indigenous technology, manufacturing and integrating state-of-the-art airborne system with the focus on small UAS. AIS is supported and funded by the TATA group and by the Ministry of Science and Technology. Interest lies in Unmanned Aerial Systems for custom Applications.

UAVs offering:

• Aquilon Mini UAV

• Urban View – Mini UAV

• Altius Mk-II – Tactical UAV

Last year, Aurora Integrated System (AIS), a subsidiary of TASL has been awarded the tender worth around 50 Lakhs for supply of 49 mini UAVs (+ Option Clause) to Indian Army having qualified through a competitive bidding process. AIS have received the supply order from Northern Command for its system Aquilon.

Alpha designAlpha is active in the segment besides other and has signed a teaming agreement with Elbit-ISTAR and Adani Aero Defence Systems & Technologies for the production and marketing of mini-Unmanned Aerial Systems (UAS) in India. The agreement covers local production of IAI’s Bird-Eye 400 and Bird-Eye 650 mini UAS as well as other mini-unmanned aerial systems. The company is likely to participate in man-portable mini UAVs for IA.

Asteria Aerospace Pvt. Ltd.Asteria Aerospace is a MSME registered with the National Small Industries Corporation. Its focus area is development of Unmanned Aerial Systems and related technologies.

UAVs and related technologies offering:

• ATOM Autopilot Flight Control System

• CYGNUS A10 Long Range UAS for military and civilian surveillance

• A400 mini VTOL UAS for surveillance and security applications

Asteria has an MoU with National Aerospace Labs (CSIR-NAL) for collaboration in research and development of unmanned aerial systems.

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Speck Systems Limited (Speck)Manufacturer of products and developer of strategic, tactical and developmental solutions enabling geospatial technologies with strengths in UAVs and system integration, optoelectronics, mapping and GIS, containerization and ruggedization, communication, software.

UAV offering:

• The BIRD-EYE 400

• I View MK50 Light & Mobile Tactical UAV System



Speck has entered a strategic teaming agreement with Israel’s Malat, IAI for manufacturing and Service support of IAI’s mini and micro UAV product range in India along with home-based support and maintenance.

Jubilant EnproJubilant Enpro is the strategic “venture business” segment of Jubilant Bhartia Group. It is one of the leading high technology products and services companies with business interests in aerospace; oil and gas; financial services; trading; and homeland and mega-city security systems.

The company has formed JV, Jubilant Aeronautics, with Israel’s Aeronautics Defense Systems addressing the growing need for UAVs and aerostat systems in India. The team has already responded to several Requests for Information (RFIs) submitted by different Indian authorities. Aeronautics will be offering various versions of its Orbiter mini-UAV.

Idea Forge Technology Pvt. Ltd.Idea Forge Technology Pvt. Ltd. develops and manufactures unmanned aerial systems and alternative energy products.

NETRA VTOL UAV is the flagship product of Idea Forge developed in collaboration with DRDO and has been inducted by BSF and CRPF. The company also offers CARBON, an autonomous hovering unmanned aerial vehicle.

The other companies who are also keen in the segment and have obtained ILs for manufacturing of UAVs include:

• BF Utilities Limited

• Ashok Leyland

• Teneja Aerospace & Aviation Limited (TAAL)

• Avaana Software & Services

• SASMOS HET Technologies Ltd.

• Punj Lloyd

• MKU

• Nova Integrated Systems Ltd.

• Varisis Advanced Engineering & Software Technology India Pvt. Ltd.

• Unique Fire Protection & Fabrication Consultants

• ICOMM Tele Ltd

• Swallow Systems Pvt. Ltd

• OM UAV Systems

• TSL Technologies Pvt. Ltd

• Tara Systems & Technologies Ltd

In addition a plethora of opportunities exist for the private sector in sub-assemblies and major sub-systems such as sensor payloads, radars, control systems, engines and other on-board equipment that are being increasingly sourced from the Indian industry and would continue to do so in future as well. Even more-exotic technologies and development of nano-technology applications will expand the conventional supplier base further.

Market sizeThe UAV industry is one of the fastest-growing military aviation markets. Till date, India has bought UAV platforms worth approximately US$1.5 billion (INR82.5 billion). There exists a significant demand for UAVs in not just the defence but also in homeland security and for civilian use as well. Keeping in mind, the projected and growing requirement of the three defence services during the next 10–12 years, there will be substantial requirement of small UAVs by the defence services. The Indian Army proposes to equip UAVs down to the battalion level in the next three to five years, while the Air Force plans to have fully operational squadrons of surveillance UAVs and UCAV. The plan includes the induction of many man-portable mini and micro UAVs for

12 | Eye on Defence

short-range surveillance, and nuclear, biological, chemical detection in the battlefield. The Indian Army, Air Force and Navy propose to buy tactical UAVs, HALE UAVs, VTOL UAVs, and MALE UAVs. There is an anticipated demand of around 50 MALE UAVs, 60 Navy UAVs, 70 Air Force tactical UAVs, 100 Army tactical UAVs and more than 1,000 mini-UAVs over the next decade. Moreover, of late, clearance has been given to the acquisition for 65 micro UAVs or spy

Exhibit 4. Anticipated share of UAV in Indian Defence Expenditure (in %)

Source: Compiled by Q-Tech synergy

30%

1%

4%

15%15%

10%

25%Air

UAV

C4ISR

NavalLand

R&D

Others

Exhibit 5. India UAV market till 2028 (in billion)


Years

Bill

ion

1.501.65

1.822.00

2.202.42

2.662.92

3.22

3.54

3.89

4.28

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

16-17 17-18 18-19 19-20 20-21 21-22 22-23 23-24 24-25 25-26 26-27 27-28

IA needs 1500-2000 UAV’s

IAF needs 300-500 UAV’s

IN needs 60-100 UAV’s

13Eye on Defence |

drones worth INR270 million for IAF’s Garud Commando Force. Briefly the net requirement emerging is, IAF: 300-500, IA: 1500-2000 and IN: 60-100. The UAV segment, therefore, promises an overall opportunity of around 1% of capital expenditure, to US$4 billion (INR240 billion) approx. in capital procurement by year 2027. As for the Civil UAV market in India, which is estimated at only 3% of the total UAV market; the civil UAV segment promises an opportunity around US$60–120 million (INR3.3–6.6 billion) over the next 10–12 years (2015–2027).

Some of the recently issued RFIs/RFPs for acquisition of various types of UAV platforms by the MoD include:

Additionally, there would be some upcoming foreign programs in the near future, since India is in talks with the US to purchase General Atomic manufactured Predator XP surveillance drones for the Indian Navy through the government-to-government route. The Indian Navy’s letter of request (LoR) to the US for purchasing 22 unarmed high-tech multi-mission predator Guardian UAV to fulfill maritime surveillance requirements is under inter agency process in the US DoD for speedy approval. The General Atomics MQ-9B Guardian is a large and heavy aircraft than MQ-1 Predator. They are likely to be equipped with Seavue radar system that provides inverse synthetic aperture radar and weather detection and avoidance capabilities, MTS-B electro-optical/infrared sensor with laser illuminator/rangefinder, and an automatic identification system (AIS).

RFIs/RFPs issued Quantity Approx. Cost

Mini & Macro UAV for Army 500 US$85 million

High Altitude Long Endurance (HALE) UAV for IA, IN --- More than US$200–250 million

UAV Mission Simulator for Army 1 US$30 million

Unmanned Combat Aerial Vehicle for IAF --- More than US$30 million

Micro Unmanned Aerial Systems for IAF and IN 95 US$10 million

Small VTOL MINI UAS for IAF --- More than US$30 million

Vertical Take Off and Landing Unmanned Aerial Vehicle for IN --- More than US$30 million

NRUAV for IN 3 US$290 million

Man-Portable Mini UAVs for IA 20 US$7–10 million

Short Range Unmanned Aerial Vehicle (SR UAV) --- More than US$30 million

Mini UAV for High Altitude for IA 20 US$100,000

Hand Held UAVs for TAC Training for IA 3 ---

Medium Altitude Long Endurance (MALE) UAVs for three Defence Services

100 ---

Source: Compiled By Q-Tech Synergy

Upcoming programsRecently, the Government has finalized a blueprint to procure more than 5,000 UAVs for the Indian Defence Forces over the next 10 years for around US$3 billion (INR180 billion) with the tenders to be restricted to domestic companies that can tie up with foreign firms. In addition, the DRDO also has an independent unmanned surveillance air vehicle on the drawing board, which is similar to the X-45 and X-47 developed in the US and is also scouting for a partner to develop a solar-powered HALE UAV. Furthermore, the Government has undertaken a concept study on development of a bomber UAV and a fighter UAV.

14 | Eye on Defence

The MQ-9B Guardian will not be armed. Furthermore, India is also keen to acquire US “Predator” C Avenger Armed Drones for IAF and is likely to make a renewed offer to the US during the Indian Defence Minister’s visit to the US in September 2016. Earlier attempt by India to acquire the drones could not proceed as the US referred to international regulations that made it impossible to export the armed Predator. In addition, in pipeline is the offer by the IAI for local manufacture of the Heron TP as part of the ”Make-in-India“ program.

India’s present holding of UAVs is meager and there is an urgent requirement to equip the military with increased quantities and more advanced unmanned technologies to gather intelligence as well as boost its firepower along the vast land and coastal borders it shares with neighboring countries and also keeping in mind the increasing insurgencies. While the requirements are clear, the moot point is to build a road map for the procurements. Both indigenization and additional foreign procurements is the need of the hour to bolster the UAV capabilities of the Armed Forces. The growing need and application of UAVs will create substantial opportunities for UAV vendors, from large defence contractors to small service companies. Given the diverse and urgent needs it will be imperative that India invests in its own R&D in this segment and also take help in form of foreign collaborations to deliver systems to help

build those capabilities now, so that in the not-too-distant future, they can manufacture more advanced and expensive systems indigenously. Steps are being taken with various tenders being issued under “Buy-Make (India)“ category lately. However, more such steps and funding from the Government’s end to the private sector is required in coming years as well.

References• “India in talks to buy U.S. Predator drones, has eye on

China, Pakistan” Reuters, 11 April 2016, via Factiva

• “Proliferated Drones - A Perspective on India” CNAS Organization, http://drones.cnas.org/wp-content/uploads/2016/06/A-Perspective-on-India-Proliferated-Drones.pdf, accessed 8 September

• “Defence indigenisation needs private sector participation” Deccan Herald, 20 March 2016, via Factiva

• “Unmanned Aerial Vehicles Market”, Markets and Markets Research Reports , http://www.marketsandmarkets.com/Market-Reports/unmanned-aerial-vehicles-uav-market-662.html, accessed 5 September 2016

15Eye on Defence |

Request for Information (1 June 2016 – 9 September 2016)

Date of Issue

RFI Details Response Date

Issued By Remarks

31-Aug-16 Bird Detection and Monitoring Radars 30-Sep-16 Principal Director C4ISR IAF

30-Aug-16 High Resolution Binocular with Graticule - QR --- Dy Commandant (MoD) For BSF

30-Aug-16 High Resolution Binocular with Graticule - QR --- Dy Commandant (MoD) For BSF

23-Aug-16 Aerostat Systems; Qty: 04 Nos. 22-Sep-16 PD C4 ISR IAF

21-Aug-16 Gun-Shot Detection System (GDS) -QR --- DG BSF For BSF

19-Aug-16 Full Mission Simulator for AN-32 RE Aircraft 19-Sep-16 Dte of plans For IAF

17-Aug-16 Spatial Disorientation Simulator for Training of Aircrew

18-Sep-16 Dte of plans For IAF

08-Aug-16 Construction and delivery of six next generation missile vessel

05-Sep-16 Directorate of Information Tech

For IN

29-Jul-16 Five diving support craft 26-Aug-16 Directorate of Ship Production

For IN

12-Jul-16 EoI for procurement of VIS-NIR hyper-spectral imaging system

30-Aug-16 DLJ Defence Laboratory Issued by DRDO

04-Jul-16 Setting up Twin Test Cell for development Aero Gas Turbine Engines up to 130 kN Thrust Class

26-Aug-16 The Director, GTRE Issued by DRDO

01-Jul-16 QINR and TDs of "Hovercraft (8 Men Capacity)” -- DTE General Border Security Force

For BSF

27-Jun-16 Medium Altitude Long Endurance (MALE) Unmanned Aerial Vehicles (UAVs)

30-Sep-16 Air HQ (Vayu Bhavan) For three defence services

24-Jun-16 Comprehensive upgrade of BMP-2/2K 18-Aug-16 DGMF For IA

08-Jun-16 QINR of "Through Wall Radar (2D)" --- HQ DG BSF, Prov Dte (Ord Sec)

For BSF

08-Jun-16 QINR of "HHTI Binocular System to N - cross with five sensors in One”

--- HQ DG BSF, Prov Dte (Ord Sec)

For BSF

08-Jun-16 EoI for development of Optronic Mast for Submarine Periscope

26-Jul-16 Instruments Research & Development Establishment

Issued By DRDO

16 | Eye on Defence

Request for Proposal (March 2016–May 2016)

Date of Issue

RFP Detail/Equipment Response Date

Issued By Remarks

9 Sep 2016 “Bullet Proof Jacket (Level III+) 30-Sep-16 GM OFB

8 Sep 2016 “7.62 x 39mm API BZ Ammunition and 7.62 x 51mm AP(WC core) Ammunition -2000 Nos each

25 Oct 2016 DMRL DRDO

01-Sep-16 Low Tech Ammunition ((a) Bicat Strip - 15504 Nos. (b) Grenade No.90 - 45466 Nos. (c) Matches Fuzee - 2268 Nos.)

22-Sep-16 DG AR For Assam Rifle

01-Sep-16 Solid Carbide Ground Rod 30-Sep-16 Gun and Shell Factory, Cossipore

Issued by OFB

01-Sep-16 Design and development of prototype locking mechanism for Su-30 helmets with the supply of 5 prototypes

21-Sep-16 Defence Bio-Engineering & Electro Medical Laboratory

Issued by DRDO

30-Aug-16 Hand-held communication Set; Qty: 1348 Nos. 26-Sep-16 HQ WAC IAF For IAF

30-Aug-16 Hand-held communication Set; Qty: 1348 Nos. 26-Sep-16 HQ WAC IAF For IAF

26-Aug-16 Voice communication system for 155mm x 52 Cal Advanced Towed Artillery Gun System ATAGS

02-Sep-16 ARDE Issued by DRDO

26-Aug-16 Tactical Vest; Qty: 10,000 Nos. 16-Sep-16 DG AR For Assam Rifle

26-Aug-16 Bullet Resistant Vests 05-Oct-16 AIG/PROV For CISF

26-Aug-16 Bullet Resistant Vests 05-Oct-16 AIG/PROV For CISF

24-Aug-16 Supply, Installation and Integration of Marine Grade Ship Board Automatic Weather Station (AWS)

28-Sep-16 Naval Physical Oceanographic Laboratory

Issued by DRDO

23-Aug-16 Hand Held Thermal Imaging Camera With Wireless System DG BSF For BSF

23-Aug-16 Multipurpose Night vision Monocular DG BSF For BSF

22-Aug-16 High Dynamics, Triple RF, IRNSS (L5&S)+GPS(L1)+Glonass(L1) and Gagan, Fast TTFF Receiver; Qty: 10 Nos.

30-Aug-16 Research Centre Imarat Issued by DRDO

20-Aug-16 Development of Light Bullet Proof Vehicle 25-Sep-16 Vehicle Factory, Jabalpur Issued by OFB

20-Aug-16 Goggle Protective Field Type; Qty: 80 Nos. 06-Sep-16 AOC, 13BRD, AF For IAF

19-Aug-16 Face Pad Complete of 84 MM CGRL; Qty:400 Nos. and Grip Hand Assy of 51 Mm Mortar; Qty: 500 Nos.

19-Sep-16 Inspector General, BSF HQ South Bengal Frontier

For BSF

17-Aug-16 Altimeter and Binoculars; Qty: 04 Each 13-Sep-16 AOC, Air Force Station Srinagar

For IAF

17-Aug-16 Jacket Tactical; Qty: 60 Nos. 13-Sep-16 AOC, Air Force Station Srinagar

For IAF

16-Aug-16 Procurement and Installation and Commissioning of Marine Radar with Accessories

01-Sep-16 Commander Coast Guard Region (A&W)

For ICG

16-Aug-16 Carbine (SMG) 9mm With Access Spares, Qty: 3123 Nos. 20-Oct-16 DG ITBP For ITBP

13-Aug-16 81mm Mortar Simulator; Qty: 05 Nos. 06-Sep-16 Directorate General For Assam Rifle

12-Aug-16 DSMD (Deep Search Mine/Metal Detector; Qty: 55 Nos. 02-Sep-16 DG ITBP For ITBP

12-Aug-16 Light Bullet Proof Vehicles; Qty: 13 Nos. 22-Sep-16 DG NSG For NSG

17Eye on Defence |

Date of Issue


Issued By Remarks

12-Aug-16 Automatic Grenade Launcher Along With Gauges And Accessories; Qty: 02 Nos.

26-Sep-16 DG NSG For NSG

10-Aug-16 Design & Dev. of GPS/Glonass Avionic Antenna; Qty: 25 Nos.

24-Aug-16 Research Centre Imarat Issued by DRDO

09-Aug-16 LWI Helmet Jaguar Aircrew 2016; Qty: 02 Nos. 23-Aug-16 Logistics Section Air Force Station Ambala Cantt

For IAF

08-Aug-16 Vehicle Mounted Surveillance System; Qty: 01 No. 27-Sep-16 Commandant (Proc) For BSF

06-Aug-16 6 Lane Advance Weapon Training Simulator of Small Arms 09-Sep-16 Recruit Training Centre, Sivagangai

For ITBP

06-Aug-16 Repair of Gallet Helmets LH250 (NVG Compatible); Qty: 05 Nis.

26-Aug-16 Air Force Station Mohanbari, Dibrugarh, Assam

For IAF

05-Aug-16 Sports Air Weapons, Pellets, Accessories, Arms And Ammunition

29-Aug-16 Air Force Sports Control Board

For IAF

04-Aug-16 NSC Processor Unit Raytheon NSC Radar 24-Aug-16 OIC Procurement INS Venduruthy

For IN

04-Aug-16 Development & Supply of Face Mask & Biological Protective Hood

19-Aug-16 DRDE Issued by DRDO

04-Aug-16 Six Lines NBC Test Jigs and Test Equipment 31-Aug-16 Dte of Armt & Safety Eqpt For IAF

03-Aug-16 GPS; Qty 200 Nos. 30-Aug-16 Directorate General, Assam Rifles

For Assam Rifle

02-Aug-16 Fuze for Adrushy Mine MK II (Assy); Qty: 2731 Sets 29-Aug-16 Ordnance Factory Chanda Dist

Issued by OFB

01-Aug-16 Multi Grenade Launcher Along With Accessories Spares And Gauges; Qty 28 nos.

13-Sep-16 DG NSG For NSG

01-Aug-16 Body Mine for 1B DIR. With Adapter 22-Aug-16 Ordnance Factory, Chanda Issued by OFB

01-Aug-16 Ship Sonar Dome 07-Sep-16 Naval Physical Oceanographic Laboratory

Issued by DRDO

28-Jul-16 NBC Filter FAS 200M 29-Aug-16 Controllerate of Procurement

For IN

27-Jul-16 Multimode Hand Grenade (filled); Qty 200 Nos. 04-Aug-16 Terminal Ballistics Research Laboratory

Issued by DRDO

27-Jul-16 Cartridge Practice N2MK I and Cartridge Service N12 MK I for Limpet Mine Disposal Equipment (LMDE)

04-Oct-16 Naval Armament Depot Mumbai

For IN

26-Jul-16 Propellant for 5.56 MM Ball Ammn; Qty: 72 09-Sep-16 Ordnance Factory Varangaon

Issued By OFB

26-Jul-16 LWI Helmets 08-Aug-16 Air Force Station, IAF

26-Jul-16 Propellant for 7.62 MM Ammn; Qty: 30 09-Sep-16 Ordnance Factory Varangaon

Issued by OFB

25-Jul-16 Communication Equipment 15-Sep-16 DG NSG For NSG

18 | Eye on Defence

Date of Issue


Issued By Remarks

25-Jul-16 Life Jackets; Qty: 1301 Nos. and Life Bouy; Qty: 109 Nos. 06-Sep-16 DG BSF For BSF

22-Jul-16 Propellant for 5.56 MM Ball Ammn. 29-Jul-16 Controllerate of Quality Assurance (Ammunition), Khadki

Issued by OFB

22-Jul-16 Pyro Cartridges PC 100 DQ; Qty: 500 Sets 12-Aug-16 Research Centre Imarat Issued by DRDO

22-Jul-16 CCTV Bullet Camera with IR 30-Aug-16 IRDE Issued by DRDO

22-Jul-16 Speed Radar Gun With Digital Inbuilt Printer 16-Aug-16 Ins Kalinga For IN

21-Jul-16 Fore Sight for 12 Bore Pump Action Gun; Qty: 8023 Nos. 17-Aug-16 Rifle Factory Ishapore Issued by OFB

21-Jul-16 Rear Sight For 12 Bore Pump Action Gun; Qty: 7102 Nos. 17-Aug-16 Rifle Factory Ishapore Issued by OFB

21-Jul-16 12 Station Infantry Weapon Training Simulator 03-Aug-16 RVC Centre And College, Meerut

IA

16-Jul-16 High Speed Motor Boat 12-Aug-16 Gun and Shell Factory, Cossipore

Issued By OFB

15-Jul-16 Advanced Land Navigation System For BMP IIK 27-Jul-16 Ordnance Factory, Medak Issued By OFB

15-Jul-16 Procurement of Fuze T and P 213 MK 5 M-R ARDE 2020; Qty: 1195.000 Nos. + 50% Qty. Under Option Clause

29-Jul-16 Ammunition Factory Khadki Pune

Issued By OFB

15-Jul-16 Navigational Radar, Furuno, Model-FAR 2127 01-Aug-16 Naval Science & Technological Laboratory

Issued By DRDO

15-Jul-16 Explosive Detection Kit 04-Aug-16 DG ITBP For ITBP

14-Jul-16 Detonator Plug to Drg. No ARM 1138: Qty - 2410.000 No. + 50% Qty. Under Option Clause

02-Aug-16 Ammunition Factory Khadki

Issued By OFB

14-Jul-16 Night Vision Binocular; Qty: 20 Nos. 21-Jul-16 CPRO Kochi For IN

11-Jul-16 LWI Helmet 09-Aug-16 AF STN Chabua Dibrugarh Assam

For IAF

11-Jul-16 Binocular prismatic; Qty 2 Nos. 27-Jul-16 Station Logistics Section For IAF

09-Jul-16 HHTI - Binocular (UnCooled) Long Range Version; Qty: 175 Nos.

30-Aug-16 DG BSF For BSF

09-Jul-16 Cartg Trg for 81MM Mor Bomb 3B 20160330; Qty 5898 Set + 50% Qty. Under Option Clause


Issued by OFB

09-Jul-16 Cartg Trg for 81MM Mortar Bomb 3A 20160329; Qty: 12371 Set + 50% Qty. Under Option Clause


Issued by OFB

08-Jul-16 Mine APM Consisting of Body, Spool etc. 12-Aug-16 Ammunition Factory, Kirkee

Issued by OFB

08-Jul-16 Reflex Sight; Qty: 3450 Nos. 01-Aug-16 HQ DGAR Laitkor Shillong For Assam Rifle

08-Jul-16 Light Bullet Proof Vehicle; Qty: 25 Nos. 19-Aug-16 Dte. Genl., ITB Police For ITBP

06-Jul-16 Integration of NGARM Missile 25-Jul-16 Director DRDL Issued By DRDO

05-Jul-16 Goggles Protective; Qty: 6,140 Nos. 27-Jul-16 Station Logistics Section For IAF

05-Jul-16 Hawk Flying Helmet and Oxygen Mask 22-Jul-16 ASTE, AF For IAF

19Eye on Defence |

Date of Issue


Issued By Remarks

04-Jul-16 Tactical Vest; Qty: 71 Nos. 29-Jul-16 Senior Logistic Officer For IAF

02-Jul-16 Time and Impact Fuze Ffv-447 (Empty Assy) To Drg Pt No. Iqx-69Ge Dc No. 36650-A Dt.26/2/00 Specn- F-1301-910540-K (Cqa-0910) Dc 36613-A Dt 11/11/99; Qty: 13519 Nos.

15-Jul-16 Ordnance Factory Khamaria

Issued by OFB

30-Jun-16 Prototype Engine Management System 01-Aug-16 Gas Turbine Research Establishment

Issued by DRDO

29-Jun-16 Bullet Resistant Jacket; Qty: 2000+ 09-Aug-16 DG CISF For CISF

28-Jun-16 ACSIM - RT Aircraft Simulator 15-Jul-16 RCI Vignayana Issued by DRDO

28-Jun-16 Goggles Protective Field Type; Qty: 140 Nos. 15-Jul-16 Air Officer Commanding For IAF

27-Jun-16 Lame Retardant Overall Sage Green (Regular) S-11, S-12 (Customize Size) and Flame Retardant Display Overalls Officers (Red Colour) (Customize Size)

12-Jul-16 Air Officer Commanding For IAF

24-Jun-16 Micro Unmanned Aerial Vehicle; Qty: 12 Nos. 27-Jul-16 DG AR , Provision Branch, Shillong

For Assam Rifle

24-Jun-16 Variable Time FZ For Pinaka RKT (F) 18-Jul-16 Ordnance Factory, Chanda Issued by OFB

24-Jun-16 Limiting Signal System of Su-30 Aircraft; Qty: 01 Prototype

18-Jul-16 AOC, 9 BRD AF For IAF

23-Jun-16 Passive Night Vision Monocular; Qty: 250 Nos. 27-Jul-16 DG Sashastra Seema Bal For SSB

23-Jun-16 ACSIM - RT: Aircraft Simulator 15-Jul-16 Research Centre Imarat Issued by DRDO

23-Jun-16 Passive Day and Night Camera 02-Aug-16 LASTEC Issued by DRDO

23-Jun-16 Nose Fuze Type A-670 M Assembly Drawing (Filled) for 30MM BMP-II HE/I AMMN; Qty 281899 Nos. With 50% Option Clause

12-Aug-16 Ordnance Factory Khamaria

Issued by OFB

22-Jun-16 40 mm Under Barrel Grenade Launchers (UBGL); Qty: 1970 Nos.

23-Aug-16 Provisioning Dte. (Procurement Cell)

For CRPF

22-Jun-16 Matching Ammunition/Grenades-Round 40 mm HE; Qty: 88062 Nos.

23-Aug-16 Directorate General, CRPF For CRPF

21-Jun-16 LWI Helmet and Mask Oxygen 11-Jul-16 Old Air Field, Air Force Station

For IAF

20-Jun-16 Explosive Detectors 26-Jul-16 Commandant (Proc.) For CRPF

20-Jun-16 Explosion Proof IR Camera With Accessories 05-Jul-16 Air Force Station Tezpur, Dist. Sonitpur

For IAF

20-Jun-16 Fuze T&P (Empty) M4 for 120mm ILLG 05-Jul-16 Ordnance Factory Dehu Road-412101

Issued by OFB

20-Jun-16 Detonator Plug for Bomb Nos.56 MK2 etc. 01-Jul-16 Ammunition Factory, Kirkee

Issued by OFB

19-Jun-16 LWI Helmet Size-2 AT 27-Jun-16 Wing commander Mou Mondal

For IAF

17-Jun-16 Bomb detection and disposal (BDD) Equipment; Qty: 10 Items

28-Jul-16 Commandant Procurement

For BSF

20 | Eye on Defence

Date of Issue


Issued By Remarks

16-Jun-16 War gaming simulator 12-Jul-16 Joint Director IT (Procurement)

For IAF

16-Jun-16 Anchorage Pontoons for Vikramaditya 29-Jul-16 Naval Dockyard, Lion Gate For IN

15-Jun-16 Passive Night Vision (Monocular), Qty: 600 Nos. 17-Aug-16 DG BSF For BSF

13-Jun-16 Diving items; Qty: 04 Types 20-Jul-16 Material Organisation, Eastern Naval Command

For IN

13-Jun-16 FRP Single Engine Speed Boat with Four Strokes OBM, Qty: 20 Nos.

26-Jul-16 DG BSF For BSF

10-Jun-16 Round Illuminating (Full Charge), Fuze RGM-2 and Fuze T-90 For 122mm Howitzer Ammunition

06-Sep-16 MGO PPO For IA

10-Jun-16 Oxygen Mask (Hawk MK-132); Qty: 40 Nos. 21-Jun-16 Station Lgs Section, Kharagpur

For IAF

10-Jun-16 Sniper Rifles; Qty: 252 Nos. 10-Aug-16 Procurement Cell of Provisioning Directorate

For CRPF

09-Jun-16 Realization, Supply and Installation of Early Warning & Advance Response Network System (e-WARN)

14-Jun-16 Research & Development Establishment

Issued by DRDO

08-Jun-16 Impulse Cartridge As Per Drawing; Qty: 2000 Nos. 13-Jul-16 HEMRL Issued by DRDO

08-Jun-16 Flash Eliminator for 5.56MM LMG 29-Jun-16 Rifle Factory Ishapore For OFB

03-Jun-16 NBC Suit; Qty: 337 Nos. 07-Jun-16 The Material Superindentend, Karwar

For IN

02-Jun-16 Bullet Resistant Jackets; Qty: 2700 Nos. 30-Jun-16 DIG (Proc) Dte. Genl. ITBP For ITBP

02-Jun-16 Vehicle Electronics Spares for Arjun MBT Mk I 21-Jul-16 CVRDE Issued by DRDO

02-Jun-16 Bird Scanning and Scaring Devices with Rechargeable Cells and Charge; Qty: 03 Nos.

16-Jun-16 Station Aerospace Safety &Inspection Officer

For IAF

02-Jun-16 Ballistic Shield 18-Jun-16 Garud Flight For IAF

01-Jun-16 Short Wave Infra Red (SWIR) Camera 07-Jul-16 Centre for High Energy Systems and Sciences

Issued by DRDO

01-Jun-16 Hydraulic Puller Sets with Accessories; Qty: 02 Nos. 27-Jun-16 Naval Dockyard (Mumbai) For IN

21Eye on Defence |

List of Industrial Licenses (ILs) filed for 1 June 2016 – 9 September 2016

Application no. and date

Name of the applicant Item of manufacture

66 28/06/2016

M/s Autostem Technologies India Pvt. Ltd. Autostem Safety Cartridge SII 36 MM (60-140 gm)

65 10/06/2016

M/s Siva Sakthi Industrial Explosives Pvt. Ltd.

Explosives Class 2

64 10/06/2016

M/s Premier Explosives Limited Manufacturing energetic binders such as HTPB, GAP etc.

63 7/06/2016

M/s Premier Explosives Limited Manufacturing Potassium Perchlorate, Sodium

62 07/06/2016

M/s Neco Desert Tech Defence Private Limited

Sniper Rifle and Assault Rifle

61 31/05/2016

M/s Rajasthan Explosives & Chemicals Limited

Ammunition for medium and high caliber weapons

60 24/05/2016

M/s Sanauto Engineers India Pvt. Ltd. Manufacture of parts and accessories of the aircraft

59 24/05/2016

M/s Eirene Land Systems Pvt. Ltd. Rifles

58 24/05/2016

M/s Jindal Stainless (Hisar) Ltd. Light armored vehicle

57 24/05/2016

M/s Eirene Space Systems Pvt. Ltd. Missiles

56 24/05/2016

M/s Eirene Defence Technologies Pvt. Ltd. Radars

55 24/05/2016

M/s Eirene Aerospace Systems Pvt. Ltd. Airplanes

54 24/05/2016

M/s Eirene Naval Systems Pvt. Ltd. Commercial vessels

53 24/05/2016

M/s Black Diamond Explosive Pvt. Ltd. Bulk explosives

52 24/05/2016

M/s Eirene Optical Systems Pvt. Ltd. Radar equipment

51 24/05/2016

Eirene Systems Special Materials Pvt. Ltd. Protective safety equipment

50 24/05/2016

M/s Super Shiv Shakti Chemical Pvt. Ltd. Slurry and emulsion

49 18/05/2016

M/s Ideal Industrial Explosives Ltd. Manufacturing of S.M.S/S.M.E explosives

48 18/05/2016

M/s Jindal Stainless (Hisar) Ltd. Explosive reactive armor

47 18/05/2016

M/s Zen Technologies Ltd. Blank ammunition

46 18/05/2016

M/s Ideal Industrial Explosives Ltd. Manufacturing of S.M.S/S.M.E explosives

22 | Eye on Defence

Name of entity Project details Value*

Ministry of Defence (MoD)

►

• ► The MoD has approved major acquisitions for the Indian Armed Forces worth INR150 billion, which have been forwarded for consideration of the Cabinet Committee on Security (CCS).

• The acquisitions include procurement of ultralight artillery guns, tracked SP gun, Dhanush guns, Akash air defence systems and C-130J Super Hercules aircraft.

INR150 billion

Defence Acquisitions Council (DAC) and Indian Navy

►

• ► DAC granted AoN (Acceptance of Necessity) to procure six next-generation missile vessels, for the Indian Navy worth approximately INR136 billion. The AoN will enable the Indian Navy to issue tenders under the ”Buy Indian” category for the missile vessels.

• The council has also approved the request to procure five diving support vessels at INR1.5 billion.

~INR140 billion

DAC and Indian Army

►

• ► DAC cleared the procurement of 145 M777 Ultra-Light Howitzers (ULH) worth INR50 billion from the US. The deal is cleared under the Foreign Military Sales (FMS) channels.

• It also approved the bulk production of 18 indigenously manufactured Dhanush 155mm howitzers. Each howitzer is expected to cost INR140 million and the army has demanded 114 Dhanush howitzers.

~INR55 billion

Larsen and Toubro (L&T)

►

• ► The MoD has finalized L&T for the largest private order of 100 mobile artillery guns, K9 Vajra-T howitzer, worth INR45 billion.

• The deal has been sent to the CCS for the final approval, which is expected by October 2016.

INR45 billion

DAC and Indian Air Force (IAF)

►

• ► DAC approved the procurement of indigenous simulators for the latest, DARIN-III version, of Jaguar aircraft worth INR5 billion for IAF.

• The DAC also approved an electronic warfare facility for the IAF worth INR14 billion, which will be manufactured by Bharat Electronics Limited (BEL). The facility will help IAF and BEL co-develop several state-of-the-art electronic warfare systems.

~INR20 billion

New projects / investments / contracts

23Eye on Defence |

ThyssenKrupp Marine Systems • ► Germany’s ThyssenKrupp Marine Systems has won a contract to upgrade Indian Navy’s two Shishumar Class submarines to fire Harpoon anti-submarine counter measure missiles by 2018.

INR2.5 billion

Rafael and IAF • ► Rafael has won a contract to provide 164 lightening targeting pod to the IAF that will be used on four types of combat aircraft including Sukhoi Su-30 aircraft.

NA

► • The contract is part of the ~INR33.5 billion (US$500 million) defence cooperation agreement between India and Israel.

NA

*The values of the deals have been converted to Indian Rupees. 1US$ = INR67.

Sources:1. “Defence Ministry nod to buy 145 ultra-light howitzers worth INR 5,000 crore from US,” The Economic Times, 25 June 2016, via Q-tech

Synergy Newsletter

2. “Defence Acquisition Council (DAC) green lights 19 proposals worth over INR 28,000 crores,” IAD News, 26 June 2016, via Q-tech Synergy Newsletter

3. “Defence Ministry Approves Buying Of C-130 J Super Hercules Aircraft,” NDTV, 25 August 2016, via Q-tech Synergy Newsletter

4. “India inks deal with ThyssenKrupp,” The Financial Express, 1 July 2016, via Q-tech Synergy Newsletter

5. “India acquires Lightening targeting pod,” Flight Global, 29 June 2016, via Q-tech Synergy Newsletter

6. “Defence ministry concludes deal with Larsen & Toubro, gives much needed ammunition to private sector,” The Economic Times, 1 July 2016, via Q-tech Synergy Newsletter

24 | Eye on Defence

Name of the entities Nature of transaction Value

Texmaco Rail & Engineering and ROSOBORONEXPORT

• ► Texmaco Rail & Engineering has signed an MoU with ROSOBORONEXPORT, a Russian state-owned agency for exports and imports of defence-related products.

• ► The MoU has been signed for cooperation in carrying out joint projects for modernization of armored vehicles operated by the Indian Army, co-production of BMP-3, R&D and production of futuristic armoured vehicles and spare parts.

NA

Wipro Infrastructure Engineering (WIN) and H R Givon

• ► WIN has acquired H R Givon, an Israel-based supplier of metallic parts and assemblies to the aerospace industry, in an all cash deal.

• ► This acquisition will help WIN broaden its product portfolio and expand its global footprint. Givon manufactures structural parts and assemblies for the fuselage, wings and empennage of an aircraft and is a key supplier to global firms such as Boeing and Hindustan Aeronautics Ltd.

NA

Reliance Defence and Gujarat Maritime Board (GMB)

• ► Reliance Defence signed an agreement with the GMB granting Reliance Defence to build, operate and manage defence and commercial shipyard activities at Pipavav port in Gujarat.

• ► Reliance Defence is the first Indian private company to obtain a license and contract to build naval warships.

NA

Tata Power SED, Lockheed Martin and Raytheon

• ► Tata Power SED has signed an agreement with Raytheon and Lockheed Martin’s Javelin Joint Venture (JJV) to co-develop and produce the Javelin anti-armor missile system.

• ► The missile system will be developed for ground combat vehicle, dismounted infantry and rotorcraft applications. The missile system has been approved for 15 foreign military sales customers.

NA

Centum Electronics and Adetel Group

• ► Centum Electronics has acquired a controlling stake of 51% in France’s Adetel Group.

• ► Adetel Group specialises in design, development and industrialisation of embedded electronic systems for defence, aerospace, industrial, transportation and energy sectors.

NA

JVs and alliances

Defence Research and Development Organisation (DRDO) and Indian Institute of Technology (IIT)

• ► The DRDO has signed a Memorandum of Agreement (MoA) with IIT-Bombay and Madras to establish a bi—nodal “Centre of Propulsion Technology” (CoPT) at the two institutions.

• ► The MoA is aimed at achieving synergy between DRDO and IITs for channelizing the research efforts toward developing critical products for the aerospace industry.

NA

Safran and Hindustan Aeronautics Limited (HAL)

• ► Safran and HAL have formed a JV to support engines used on HAL-produced helicopters and HAL Shakti engines (Indian designation for the Ardiden 1H1).

• ► The Shakti engines powers HAL’s Dhruv and the new Light Combat Helicopter (LCH), while the Ardiden 1U will power the future Light Utility Helicopter (LUH).

NA

Thales and Elettronica • ► Thales and Elettronica signed an agreement to explore initiatives and pursue growth business opportunities in the electronic warfare segment.

• ► The agreement will aim to strengthen their industrial and commercial operations in the defence business.

NA

Sources:1. “Texmaco Rail signs pact with Russian ROSOBORONEXPORT,” Business Standard, 26 July 2016, via Q-tech Synergy Newsletter

2. “Wipro Infrastructure to acquire Israel’s H R Givon,” The Economic Times, 1 August 2016, via Factiva

3. “Reliance Defence in pact with Gujarat Maritime Board to manage shipyard activities at Pipavav,” The Economic Times, 22 July 2016, via Q-tech Synergy Newsletter

4. “Thales and BTSL partner to jointly develop PHAROS fire control radar,” Market Line, 4 May 2016, via Factiva

5. “Centum Electronics picks up 51% stake in France’s Adetel Group,” The Financial Express, 17 June 2016, via Q-tech Synergy Newsletter

6. “DRDO inks pact with IITs for Centre for Propulsion Technology,” The Financial Express, 9 July 2016, via Q-tech Synergy Newsletter

7. “Safran, HAL form engine MRO joint venture,” Vayu Aerospace & Defence Review, 4 August 2016, via Factiva

8. “Thales and Elettronica MoU for Electronic Warfare,” VADR, 4 August2016, via Factiva

25Eye on Defence |

26 | Eye on Defence

Country Nature of transaction Additional details

France • France is likely to invest INR75 billion (€1 billion) on India’s combat jet engine program, Kaveri.

• French experts assessed an additional 25%–30% of additional work to make the engine ready.

• The proposal is to use offset credits that is expected to come from the planned Rafale fighter jet deal to revive the indigenous jet engine project.

Russia • Russia and India have signed some key deals including upgrade of 10 KA-28 helicopters and Su 30 MKI aircraft.

• The total value of the deals is expected to be around INR40 billion, INR20 billion each KA-28 and Su 30 MKI.

• The upgrade of the Su-30's will include adding new avionics, sensors and radar, improving its stealth capability and modernization of the cockpit while KA-28 will receive state-of-the-art western weapons and sensors and the upgrade is to be completed by 2020.

The US • India and the US have signed the “Logistics Exchange Memorandum of Agreement” (LEMAO). The agreement make the two countries logistical allies and enable both the militaries to use each other's assets and bases.

• The Indian Defence Minister, Manohar Parrikar has also discussed possibility of co-development and co-production of advanced defence products, including aircraft carriers, as part of DTTI with the US Defence Secretary Ashton Carter.

Afghanistan • India has agreed to extend military support under different scopes to Afghanistan.

• Afghanistan’s army chief Gen. Qadam Shah Shaheem presented his military wish-list to the Indian authorities.

Country-level deals and initiatives

Sources:1. “India, US sign logistic exchange pact boosting defence ties,” The Times of India, 30 August 2016, via Q-tech Synergy Newsletter

2. “France offers EUR 1 billion to revive India’s combat jet engine project,” The Economic Times, 4 July 2016, via Q-tech Synergy Newsletter

3. “India’s navy to upgrade 10 Ka-28 helicopters,” Flight Global, 4 August 2016, via Factiva

4. “India to Upgrade Russian-Made Su-30 Fighter Jets Amid Delay in Rafale Deal,” Sputnik, 16 August 2016, via Factiva

5. “India To Extend Military Cooperation To Afghanistan, Under US Demand,” Bakhtar News, 5 September 2016, via Factiva

27Eye on Defence |

Anti-submarine torpedo, Varunastra joins the Indian NavyIndigenously-built anti-submarine torpedo Varunastra has been successfully inducted in the Indian Navy. With this induction, India becomes the eighth country globally to have such heavyweight anti-submarine torpedo. It is developed by a premier laboratory of DRDO, Naval Science and Technological Laboratory (NSTL). The torpedo weighs around 1.25 tonnes and carries around 250 kg of explosives at a speed of around 40 nautical miles an hour.

(Source: “Anti-submarine torpedo Varunastra inducted in navy,” The Economic Times, 29 June 2016, via Factiva)

Medium range surface-to-air missile tested successfullyThe Indo-Israeli Medium Range Surface-to-Air Missile (MRSAM) was tested successfully by DRDO at Chandipur in Odisha. The missile had been jointly developed by Israel Aerospace Industries, DRDO and Israel’s Administration for the Development of Weapons and Technological Infrastructure. The MRSAM is nuclear capable and can carry a payload of 60 kg. It also includes a multi-functional surveillance and threat alert radar for tracking, detection and guidance of the missile.

(Source: “Indo-Israeli medium range missile test fired,” Business Standard, 30 June 2016, via Q-tech Synergy Newsletter)

DRDO test fires indigenous glide bombsThe DRDO successfully test fired precision-guided smart glide bombs, Garuthmaa and Garudaa, at the Pokhran firing range in Jaisalmer from a Su-30 MKI aircraft. Garuthmaa is a 1,000-kg winged smart glide bomb and have a 100-km range while Garudaa is a non-winged glide-bomb and have a range of 30 kilometres.

(Source: “DRDO successfully tests ‘glide bombs’ in Pokhran,” The Times of India, 20 August 2016, via Q-tech Synergy Newsletter)

DRDO successfully tests Advanced Artillery Gun SystemThe DRDO successfully conducted the proof firing of Armament system for 155 mm x 52 calibre Advanced Towed Artillery Gun System (ATAGS) during the technical trials conducted at Proof & Experimental Establishment (PXE), Balasore. ATAGS is a fully indigenous towed artillery gun system project developed by DRDO as a part of its artillery modernization program of the Indian Army.

(Source: “DRDO Embarked Major Success in Advanced Artillery Gun System,” PIB, 14 July 2016, via Factiva)

Autonomous Underwater Vehicle (AUV) tested by DRDOThe DRDO owned, Naval Science and Technological Laboratory (NSTL), has successfully completed all trials of the Autonomous Underwater Vehicle (AUV). The AUV is critical for underwater mine sweeping, mine laying and also to gather intelligence and surveillance of enemy vessels. The one developed by NSTL’s scientists can perform tasks at a depth of around 300 m to 500 m under the sea, relatively noiselessly and without being detected by enemy vessels.

(Source: “Underwater vehicle tested by Naval Science and Technological Laboratory,” Deccan Chronicle, 28 July 2016, via Factiva)

BrahMos missile successfully integrated with Su-30 MKI aircraftBrahMos Aerospace successfully tested the integration of India’s supersonic cruise missile system BrahMos on Su-30MKI aircraft. The tests were carried out at HAL’s Nashik facility in Maharashtra. The integration makes IAF the only Air Force in the world, which possesses a supersonic cruise missile system. The BrahMos missile has a strike range of 290-km and can travel at a speed of Mach 2.8 and is capable of being launched from land, sea, sub-sea and air against sea and land targets.

(Source: “Integration of BrahMos missile with Su-30MKI demonstrated successfully,” The Indian Express, 25 June 2016, via Q-tech Synergy Newsletter)

Industry buzz

28 | Eye on Defence

India’s basic trainer jet, HTT-40 makes inaugural flightIndia’s indigenous basic trainer aircraft, HTT-40, made its inaugural flight in Bengaluru. The aircraft is developed by HAL and will be used for the first stage training for all flying cadets of the three services, Air Force, Army and Navy. IAF is expected to procure 70 HTT-40 aircraft. The aircraft has more than 80% indigenous content with more than 75 systems of the total 90 are procured from within the country.

(Source: “Indigenous Trainer Aircraft HTT-40 Makes Inaugural Flight,” NDTV, 17 June 2016, via Factiva)

HAL successfully tests the upgraded Mirage-2000HAL tested the upgraded Mirage-2000 aircraft in its final operational configuration (FOC) design. The upgraded Mirage 2000’s FOC configuration covers the integration of India-specific weapons, sensors and EW system and gives additional capability of air-to-ground weapon, training, helmet mounted display etc. The initial operation configuration (IOC) was designed by Dassault and Thales while FOC design and development activities were taken by HAL.

(Source: “HAL flies upgraded FOC Mirage 2000; boost for IAF,” The Financial Express, 29 July 2016, via Q-tech Synergy Newsletter)

MoD working on establishing venture capital funds in defence sector The MoD is working on setting up an INR300 billion corpus for defence production by foreign companies. According to the initial proposal, the foreign defence companies that have sold equipment to India can invest in VCFs as part of their offset obligations (at least 30% of the contract value must be invested back in India). Foreign companies can invest up to 25% of their offset obligations in such funds and such VFCs will be cleared by the MoD.

(Source: “Government working on INR 30,000 crore corpus for venture capital funds in defence sector,” The Economic Times, 15 July 2016, via Factiva)

MoD formed an internal committee to finalize strategic partnership modelThe MoD has formed an internal committee for finalizing the DIPP-2016 final chapter of strategic partners regarding the number of government contracts. The Government is to select a private player to exclusively make a military platform for a specified period of time.

(Source: “Defence manufacturing: Another panel to finalise strategic partner model,” The Indian Express, 15 July 2016, via Factiva)

Secret Data on India’s Scorpene submarine program leakedSensitive data relating to combat capability of the six Scorpene class submarines that are under development for the Indian Navy has been leaked. Mazagon Dock Limited, in collaboration with the French shipbuilder DCNS, is developing six Scorpene submarines under Project 75 worth US$3.5 billion with the first of the Scorpene class submarines to be inducted by year-end and the remaining to be delivered by 2020. The leaked DCNS data has sensitive information around the stealth capabilities, intelligence gathering frequencies, diving depths, noise levels, and magnetic, electromagnetic and infra-red data.

(Source: “French submarine builder in massive leak scandal,” The Australian, 15 July 2016, via Q-tech Synergy Newsletter)

HCL Infosystems develops Defence Communication Network (DCN) for Indian Armed ForcesHCL Infosystems has developed an indigenous converged communications network for the Armed Forces. The network is the largest single satellite network in the Indian defence forces, spread across the country. DCN will bolster the prowess of the defence forces during both critical operations and rescue missions.

(Source: “Indian armed forces get converged communication network,” Hindustan Times, 30 June 2016, via Q-tech Synergy Newsletter)

Global Aerospace & Defence News

29Eye on Defence |

30 | Eye on Defence

Key themes from leading US based A&D players

This section covers the top themes discussed in the 2Q16 earnings releases of seven of the largest US-based A&D companies: Boeing, General Dynamics, Honeywell, Lockheed Martin, Northrop Grumman, Raytheon and United Technologies.

Defence spending and macroeconomic conditions, share repurchases and dividends, and cost control were the top themes discussed. The other key themes discussed included market demand, new products and programs, international business and improving cash flows. In addition, companies also discussed pensions, manufacturing efficiencies including production rates and exchange rate. Lockheed Martin, Northrop Grumman, Raytheon and Honeywell discussed most of the top-ranked themes in their earnings calls.

Boeing General Dynamics

Honeywell Lockheed Martin

Northrop Grumman

Raytheon United Technologies

Defence spending and macroeconomic conditions

Cost control (cost-cutting measures implemented by the company)

Market demand: commercial and military

New products/programs

International business

Manufacturing efficiencies, including production rates

Exchange rate

High priority themes Low priority themes

Moderate priority themes Themes not discussed

Summary matrix for the top themes in 2Q16

31Eye on Defence |

Rank Theme Description

1 Defence spending and macroeconomic conditions• Leading A&D players

are expecting a modest growth in the US defence spending; they do not expect Brexit to be a major threat to their business

• ► In medium to long term, Boeing, Lockheed Martin and United Technologies expect a modest growth in the US defence budget, while Northrop Grumman and Raytheon are concerned by the continuing resolution in FY17 by the US Government.

• ► Honeywell, General Dynamics, Northrop Grumman and Raytheon see no significant impact on their businesses in the short to medium term due to Brexit, largely because of prevailing uncertainties and lower share from the UK.

2 Cost control• Companies are focusing

on reducing costs to improve affordability while maintaining profitability

• ► Lockheed Martin announced two cost-reduction initiatives: one in the production run of aircraft and the other in the form of a regional sustainment center. The two programs are expected to save US$5 billion by 2021.

• ► All the leading A&D players involved in the production of the F-35 aircraft, including Northrop Grumman and Lockheed Martin, have partnered to implement cost-reduction initiatives to make the aircraft more affordable.

• ► Both Honeywell and United Technologies are focusing on reducing their indirect spends and implementing their restructuring plans.

3 Commercial and military market demand• Passenger traffic growth

is driving the demand for commercial aircraft; the military market is expected to improve globally

• ► Air traffic growth and rising replacement demand is expected to result in modest growth in the A&D industry. Passenger traffic (RPK) is expected to witness a growth of 6.2% in 2016.

• ► The A&D players are expecting a period of modest growth in defence spending over the next five years, driven by increased defence spending in Asia-Pacific and the Middle East.

4 New products and programs• The key programs of

major A&D companies are on track

• ► In July 2016, Raytheon delivered its first Air and Missile Defense Radar (AMDR) to the US Navy’s Pacific Missile Range Facility.

• ► In 2Q16, Lockheed Martin developed three test CH-53K helicopters for test runs. Recently, it successfully lifted a 27,000 pound external load, satisfying the contractual requirement. Northrop Grumman successfully implemented the US Navy’s Surface Electronic Warfare Improvement Program (SEWIP) and developed a new jammer JCREW for the Navy during 2Q16.

Description of the top themes discussed by A&D executives

32 | Eye on Defence

Rank Theme Description5 International business

• Most of the companies registered an increased international sales

• ► Raytheon’s international revenues increased by 8% in 2Q16, accounting for 32% of the company’s total revenue.

• ► Lockheed Martin’s international business revenues are growing, driven by the delivery of F-35 aircraft, including the delivery of two units to the Netherlands and one to Israel. Denmark also cleared the purchase of 27 F-25 aircraft in 2Q16.

6 Production rates • Companies are ramping

up production as orders for key programs pick up globally

• ► Boeing is ramping up the production of the 737 aircraft from 42 units per month in 2016 to 47 units per month in 2017, and further plans to increase it to 57 units per month by 2019.

• ► Lockheed has ramped up the F-35 aircraft production rate from 45 units per year in 2015 to 53 units per year in 2016, and plans to increase it to 145 units per year by 2020.

• ► Northrop Grumman is reaching an inflection point where planned ramp-ups on production programs are beginning to outpace declines on mature legacy programs. The growth in manned and autonomous systems drove a 4% increase in 2Q16.

7 Exchange rate • Operating in a

number of countries across continents, A&D companies are susceptible to fluctuations in foreign currency exchange rates

• ► In 2Q16, General Dynamics and Northrop Grumman reported negative foreign exchange impacts of US$100 million and US$30 million, respectively.

• ► Honeywell has hedged approximately 75% of the 2017 euro P&L exposure at US$1.15 and roughly 50% of the 2017 British pound P&L exposure at $1.44 to protect its pound—euro based earnings.

• ► During 2Q16, the US dollar appreciated by 2.5% against the euro and 6.8% against the British pound.

Note: The ranking of the themes was decided based on the number of companies discussing the themes. The scope of this ranking was limited to examining transcripts and presentations that were part of 2Q16 earnings conference calls.

33Eye on Defence |

Impact of Brexit on the A&D sector

Most of the leading A&D players do not see a significant impact of Brexit

• Leading players such as Honeywell and Raytheon see no impact of Brexit in short run.

• However, analyst firm IHS Janes forecasts that foreign direct investment in UK defense assets could dry up. It projects a US$3 billion (£2.3 billion) cut in annual spending on the British Armed Forces in 2020.

NATO countries to increase defense spending

The collective defense spending of NATO members is expected to rise by US$8 billion in 2016

• The collective defense spending of the NATO members, excluding the US, is expected to rise by 3%.

• In 2016, 22 countries in the NATO will increase defense spending in real terms, while 18 countries are expected to increase their defense expenditures on major equipment and research and development.

A&D developments in foreign countries

The US foreign military sales likely to reach US$40 billion in FY16, down by US$6.6 compared to FY15

• The US Government is expected to approve foreign military sales worth ~US$40 billion in FY16 ending October 1, down by ~14.2% from $46.6 billion in FY15.

• The Government has launched 40 separate initiatives to streamline the foreign arms sales approval process.

• Global demand for US helicopters remained strong in FY16.

The US Air Force (USAF) funds for sixth generation combat aircraft engine

• The USAF has awarded a set of contracts to GE Aviation and Pratt & Whitney to progress its Adaptive Engine Transition Program (AETP). Both companies together received contracts worth US$1.01 billion, with a period of performance ending in 2021.

• The next generation aircraft engine is expected to have a 30% increase in range, a 25% improvement in fuel consumption and a 10% boost in thrust compared to the fifth generation combat aircraft engine.

Germany plans to invest US$150 billion by 2030 for military modernization

• Germany is planning to invest approximately US$150 billion (€130 billion) by 2030 on modernizing military equipment and enabling the military to better fulfill its foreign missions.

• The country is expected to spend ~US$16 billion on replenishing its depleted stockpile of ammunition. The current stocks have fallen to a two-day supply, far below NATO's Cold War requirement of 30 days.

• It will also increase the size of its armed forces by ~11,400 troops for the first time since the end of the Cold War.

Global industry buzz

34 | Eye on Defence

After developing the world’s largest military transport aircraft, China is focusing on its indigenous aircraft engine

• China has developed an indigenous military transport aircraft, Y-20. It is the world's largest military transport aircraft and will be primarily used for marine missions. China now becomes third country after the US and Russia to develop its own transport aircraft.

• China has also invested ~US$20 billion in an aircraft engine manufacturing plant. The facility will develop both commercial and military aircraft that will power its own aircraft, including C919.

Japan Air Self-defense Force (JASDF) is focusing on strengthening its aircraft fleet

• Japan is planning to deploy ~100 fifth-generation fighter aircraft worth US$40 billion. The Japanese defense ministry is expected to award a contract by the end of 2018, with delivery of all aircraft expected by 2030.

• The Japanese defense ministry is considering three options for the contract: develop an all-new fighter indigenously, collaborate with a foreign partner for a new aircraft, or buy or upgrade an existing aircraft.

The UK orders aircraft and helicopters worth ~US$6 billion during the Farnborough Air Show

• During the Farnborough Air Show, held in July 2016, the UK defense ministry ordered nine military surveillance jets (P8-A) worth US$3.9 billion and 50 AH-64E Apache attack helicopters worth ~US$2.3 billion from Boeing.

• The deals have been cleared by the US State Department under the government-to-government sale route.

Major updates from US-based defense contractors

Lockheed Martin is likely to finalize a contract worth ~US$15 billion with the US Department of Defense (DoD)

• Lockheed Martin expects to reach an agreement with the US DoD for a deal for 160 F-35 fighter jets valued at around US$15 billion.

• The company has also won key contracts worth US$733 million from the US Army for aerial intelligence, surveillance and reconnaissance work, and a joint contract with Raytheon worth US$649.7 million for the modification of Paveway II laser-guided bombs.

Northrop plans to start the production of second Japanese E-2D Advanced Hawkeye airborne early warning (AEW) and surveillance aircraft

• Northrop Grumman has received a contract from the US Navy to begin production of the second Japanese E-2D Advanced Hawkeye AEW and surveillance aircraft.

• The first Japanese E-2D is in production and will be delivered in 2018.

• The company also received an order from the USAF worth ~US$200 million for the maintenance of Global Hawk surveillance drones.

Raytheon wins key contracts from the US Navy (worth ~US$3.2 billion) and is about to finalize a US$5 billion deal with Poland

• Raytheon has won three key contracts from the US Navy: a US$2.6 billion contract for missile interceptors, a US$300 million contract for sidewinder missiles and a US$350 million contract for the Aegis weapons system.

• The company is also finalizing a US$5 billion contract with Poland for a missile defense system.

BAE Systems enters into a 10-year partnership with the UK Ministry of Defense (MoD) to support the Typhoon fleet

• BAE Systems entered into a 10-year deal worth US$2.7 billion with the UK Ministry of Defense to support the Typhoon fleet. The deal could generate savings of more than US$658 million for the UK MoD.

• The company has also partnered with General Dynamics to compete in a program for the British Army’s Challenger 2 main battle tank fleet.

35Eye on Defence |

Sources:1. “House Passes Defense Appropriations”, Defense News, 16 June 2016, via AIA Daily News.

2. “US Air Force Funds Next Advanced Engine Stage”, Defense News, 1 July 2016, via AIA Daily News.

3. “U.S. arms sales approvals on track to reach nearly $40 billion”, Reuters, 13 July 2016, via AIA Daily News.

4. “House passes $576B defense spending bill”, The Hill, 16 June 2016, via Factiva.

5. “USAF Has Big Plans, But Little Money, For ‘Warthog’ Replacement”, Defense News, 15 June 2016, via AIA Daily News.

6. “US Navy Faces $848 Million Ops & Maintenance Shortfall”, Defense News, 26 May 2016, via AIA Daily News.

7. “European allied defence spending to rise in 2016, predicts NATO”, IHS Janes, 5 July 2016, via AIA Daily News.

8. “Defense spending shows ‘further increase’ in 2016, says NATO chief”, DW, 13 June 2016, via Factiva.

9. “Japan Secures SM-2 Missiles for Destroyers”, Defense News, 21 July 2016, via Factiva.

10. “Tokyo speaking with industry about futuristic F-3 fighter”, Flight Global, 30 June 2016, via AIA Daily News.

11. “Japan’s Air Force to Receive 100 New Stealth Fighter Jets”, The Diplomat, 7 July 2016, via AIA Daily News.

12. “China Rolls Out World’s Largest Amphibious Aircraft”, Miltary.com, 24 July 2016, via Factiva.

13. “China vows to use market forces to boost defence capabilities”, Reuters, 21 July 2016, via Factiva.

14. “The World’s Largest Military Plane in Production is China’s Y-20”, Popular Science, 20 June 2016, via Factiva.

15. “Raytheon cleared for likely $2.6 billion in new missile orders”, Boston Globe, 20 July 2016, via Factiva.

16. “Raytheon gets $291M Sidewinder missile contract mod”, UPI, 5 July 2016, via AIA Daily News.

17. “Raytheon awarded ►$365 million Aegis contract”, UPI, 31 May 2016, via AIA Daily News.

18. “Raytheon Co. nears big missile deal with Poland”, Lowell Sun, 11 July 2016, via AIA Daily News.

19. “Northrop to support Air Force drone operations”, C4ISR net, 28 June 2016, via AIA Daily News.

20. “Northrop Grumman to continue maintenance of Global Hawk surveillance drones”, Washington Business Journal, 22 June 2016, via Factiva.

21. “Lockheed Martin wins $733 million aerial ISR contract”, UPI, 21 June 2016, via AIA Daily News.

22. “Lockheed Martin, Raytheon units win $649.7 million defense contract: Pentagon”, Reuters, 9 May 2016, via AIA Daily News.

23. “Lockheed sees deal soon with Pentagon for 160 more F-35 fighter jets”, Reuters, 9 May 2016, via Factiva.

24. “German defence needs to spend billions to rebuild munition stocks -source”, Reuters, 6 July 2016, via Factiva.

25. “BAE, Industry Partners Team Up for Challenger 2 Race”, Defense News, 3 June 2016, via Factiva.

26. “Northrop Grumman Begins Work on Second Japanese E-2D Advanced Hawkeye”, Global news wire, 3 August 2016, via Factiva.

27. “Poland closer to clinching $5 bln missile deal with Raytheon :minister”, Reuters, 11 April 2016, via Factiva.

36 | Eye on Defence

Analysis of M&A trends

A&D highlights: 20161

Deal value

• Deal value in 2Q16 (US$2.6 billion) was 23% less than that in 2Q15 (US$3.4 billion).

Exhibit 6. A&D deals yearly view (2011—YTD2016*)


30,696

11,497 9,70815,625

56,655

5,571

235 240215

250

234

101

0

10,000

20,000

30,000

40,000

50,000

60,000

0

50

100

150

200

250

300

2011 2012 2013 2014 2015 2016

A&D Value ($b) A&D deals

Exhibit 7. A&D quarterly view (1Q11—2Q16*)


A&D Value ($b) A&D deals

0

10

20

30

40

50

60

70

80

90

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Num

ber o

f dea

ls

Deal

val

ue U

S$b

• There were two deals of over US$1b in 2016: KKR’s acquisition of Airbus’s Defence Electronics unit and TransDigm’s acquisition of ILC Holdings.

1 Thomson One (01 January 2011 — 08 August 2016)

37Eye on Defence |

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In India, EY with its dedicated team of aerospace and defence (A&D) professionals, functional capabilities and globally experienced talent, enables its international clients to successfully enter, operate and succeed in the Indian market.

For further details, please contact: Sailesh Rao, Leader Defence Advisory | [email protected]

What makes us different?

Select experience Services

• Dedicated A&D teams with specialization in packaging business advisory with regulatory advisory

• Team members involved in prestigious projects such as:

• Drafting the Defence Procurement Procedures and founding the Defence Offset Facilitation Agency

• Setting up an A&D manufacturing facility at Mahindra aero-structures

• Total experience of 66 man years in the armed forces; MoD administrative experience of 14 man years

• Offset structuring worth US$ 3.7

executed successfully

• Experience with foreign clients include large US, European and South Asian multinationals; strong capabilities in offset program and supply chain structuring and vendor

• Capabilities in market entry strategies for renowned Indian clients and a host of MSMEs

• Strong connects with Indian companies across manufacturing and services sector

• Project methodology driven by primary information and deep sectoral competencies

• Eye on Defence — India’s largest circulated and read A&D quarterly

• Joint research with CII on opportunities with DPSUs and in offsets and on enhancing the participation of MSMEs in India with CII

• Invited speaker at prestigious A&D conventions; US-India HTCG, Aero India, Singapore Airshow and GOCA

• Contribution to policy recommendations at industry bodies such as AMCHAM, USIBC, CII, FICCI etc.

• One of our team members was a part of the 10—member committee to suggest changes to the DPP 2013.

• One of our team members had provided input to the Indian Defense Offset policy in 2006.

• EY prepared a research paper for the DRDO on enhancing the participation of the private sector in Defence R&D.

• EY prepared a white paper for DOMW (DDP) to analyze the effects of the abeyance order on services as valid offset discharge.

Team of sector experts Multiple engagements in the sector

Thought leaders in the sector MoD policy advisory experience

Offset related services• • Regulatory compliance• Finalization of offer

Mergers and acquisitions• Asset & capital allocation advisory• Buy-side M&A advisory• Sell-side M&A advisory• Capital markets lead advisory services

Business advisory• • • New market investment strategy• Strategic portfolio services

Regulatory advisory• Export licensing• Industrial licensing• FIPB application

Taxation• Specialized defence project taxes optimization • Business tax • Indirect tax• International tax• Transaction tax

This announcement appears as a matter of record only.






Large Indian Infrastructure GroupBusiness advisory

Entry strategy in A&D

US Strategic Electronics OEMLitigation services

Advisory services

Tax compliance

US Jet Engine ManufacturerOffset advisory

Business advisory

Tax advisory

Transfer pricing

US Aerospace Systems OEMTax advisory

Tax compliance

Transfer pricing

Transaction tax services

Risk advisory services

Indian DPSU Shipyard Business advisory

Formulation of business plan

and implementation procedure

Swiss Aircraft ManufacturerOffset advisory

Business advisory

Tax advisory

*Ranked as #1 brand in India for three consecutive editions of the biennial Global Brand Survey 2015 (Kantar), 2013 (TNS), 2011 (TNS)

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Disclaimer: The information contained herein does not constitute an offer to sell or a solicitation of an offer or a recommendation to purchase securities under the securities laws of any jurisdiction, including the United States Securities Act of 1933, as amended, or any US state securities laws, or a solicitation to enter into any other transaction. Any securities transactions with a US-based buyer will be effected through Ernst & Young Corporate Finance (Canada) Inc., a US registered broker-dealer that is part of a global network with Ernst & Young LLP in accordance with Rule 15a-6 under the United States Securities Exchange Act of 1934, as amended.

39Eye on Defence |

Our offices in India

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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Ernst & Young LLP is a Limited Liability Partnership, registered under the Limited Liability Partnership Act, 2008 in India, having its registered office at 22 Camac Street, 3rd Floor, Block C, Kolkata - 700016

© 2016 Ernst & Young LLP. Published in India. All Rights Reserved.

EYIN1610-095 ED None

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Ernst & Young LLP nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

AGK

EY refers to the global organization, and/or one or more of the independent member firms of Ernst & Young Global Limited

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For more information , please contact:

K. Ganesh RajPartner and LeaderAerospace and Defence PracticeErnst & Young Pvt. Ltd.Tel: + 91 120 671 7110Email: [email protected]

Ankit TyagiAssociateCorporate Finance Strategy Aerospace & DefenceErnst & Young Pvt. Ltd.Mob: + 91 9711132596Email: [email protected]

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Eye on Defence Oct 2016

Government & Nonprofit

Transcript of Eye on Defence Oct 2016