Indian Defence Business Perspective
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Transcript of Indian Defence Business Perspective
Indian Defence Business Perspective
A Pragmatic Approach
MoD Land System
◦ Indian Army
Naval System
◦ Indian Navy
◦ Coastguards
Air System
◦ Indian Air Force
External Security
MHA
Border Security Force
Assam Rifles
SSB
Paramilitary Forces◦ CRPF◦ CISF◦ BSF◦ SSB◦ ITBP
State Police
Others◦ BP R&D◦ NSG◦ IB◦ NIA
Internal Security
Manpower and Equipment need is large!
1.25 million men in Indian Army, and further over 1 million in paramilitary organizations (above and next page).
Indian Amy has approx. 130,000 light to heavy wheeled vehicles, not including Jeeps or armoured vehicles
India’s total defense expenditure during 2015-2019 is expected to be $241.2 billion, of which about $100 billion is expected to be equipment.
70% is at present Import, and India is the world largest Defence Importer.
GoI wishes to reduce import Foreign Exchange outflow by:
Imposing stringent Offset Liabilities of 30 to 50%
Encouraging Local Companies to participate, rather than increasing
dependence on Government Owned Enterprises (OFB, BEML etc.)
In addition, Internal Security expenditure with Paramilitary Forces is expected to be $12.5 billion between 2015-17
Business Potential
Until recently FDI was capped at 26% (49% possible in theory but never happened in practice until recently)
New Government talked of 49-51%, with 74% allowed with Transfer of Technology and up to 100% in “special circumstances”
But resistance from Ministry and established players.
New budget allows 49%, and strong rumours of increase to 51+% as administrative order.
Will still require DIPP Registration/Licence.
Liberalization of Defence Company Ownership
Sr. Projects VolumeRevenue
(in Million $) Remarks
1 LSV 4000 466 RFP Released
2 LAM 1200 340 RFP Released
3 2.5T- 4x4 15000 500 Replacement of TATA 715-4x4
4 5T-4x4 50000 3000 Replacement of AL Stallion 4x4
8 Mounted Gun System 814 1900RFI Stages
9 Towed Gun System 400+1200 TBD
10 LBPV 4x4 >500 100Future Projects
11 IMV 3000 250
Opportunities
Other opportunities include FICV, UGV, APC 6x6, etc.
Internal discussions in Army
Acceptance of Necessity and draft QR
RFI (Draft Spec) issued to potential OEM
Feedback Evaluated (Localization content set)
Project Lifecycle - DPP ProceduresINITIATION
EXECUTION RFP (Firm Spec) issued with terms of reference
OEM make Technical and Commercial Offers
Technical offers evaluated &Test Vehicles requested (Usually NCNC)
Trials take place (Typically 2 years+)
Commercial bids opened for successful vehicles. Low bidder designated L1
Negotiations with L1 and order placement. (36 months from the date of release of RFP)
CONCLUSION
Attempt was to produce a transparent (corruption free) System (not 100% successful!)But:
◦ No bonus points for superior product- User gets the minimum offering that just scrapes through the trials, not be best product!
◦ NCNC System means that costs to compete are high – no SME can afford to gamble so high!
◦ Slow! Typically 4 years from RFI to first production. User will demand that initially quoted costs should stand.
◦ No detailed long term plan published by Army. Inadequate time for vehicle development if wait for firm spec in RFP.
◦ Only considers first acquisition cost, not through life cost.
TIMING MUCH QUICKER IN PARAMILITARY!
Weakness of DPP System
Tata Motors – Strongest player Defence Logistics and Armoured. Ashok Leyland. – Recent top performer, have Super Stallion contract. OFB – 100% GoI Ownership. Licensed manufacturer of Tata 2.5T-4x4 and
Ashok Leyland Stallion 4x4. Have looked at other partnerships. Mahindra (Defence Land Systems) – past player in jeeps, have an MPV,
used to have BAE partnership. Not financially successful. AMW – New entrant with a strong R&D team. SA partnership. BEML – 54% GoI Ownership. Used to team with Tatra, looking for more
opportunities. MAN India – have tried to enter with Heavies. Not yet successful due to
high price and limited products. Volvo – Eicher – Little apparent interest at present. Bharat Benz (Daimler Benz) – No interest as yet. Larsen and Toubro (L&T) – have teamed with vehicle manufacturers
and may enter themselves. Bharta Forge –Building a Defence business, intially in Artlillery &
Armoured vehicles
Competitive Landscape- India
Competitive Landscape- India
Stallion
LAM
FICVMPV
2.5T -4x4TATRA 8x8
MARKSMAN
HMV 8x8
LSV
Indian RFPs tend to be rather unique, and difficult to adapt an existing vehicle to meet these.
Indian components are very low cost compared to US and EU. (30-60% Typically). To be cost competitive must plan on maximizing Indian content.
What would be considered a low price in US/EU would be a very high price in India and unlikely to be L1.
Importance of Indian Development
International Truck Makers use Indian sourced Product (Daimler Benz, Volvo)
Costs are very low in India by US/EU standards Indian products generally acceptable in Asia, ME,
North and Sub Saharan Africa, Latin America. Huge Market out there, but spread over 90-100
countries.
India as a source for Exports to 2nd or 3rd world countries.
In-depth understanding of Defence establishments & acquisition
plan
Expert in DPP
Key contacts
Expert field management of Trials
Business development- Partnership/JV
Resourceful in facility development
Strong organization builder of sound technical & support team
Exports & Line of credit opportunity
Experience & Expertise
THIS IS ALL FOLKS!