The Tatas and Larsen & Toubro Ltd may set up separate companies to target defence deals, said investment banking sources. The Mahindras and Godrej are also eyeing defence in a big way.
With the Ministry of Defence planning to award services contracts worth Rs 20,000-Rs 30,000 crore ($5-8 billion) in the near future, these business groups are planning tie ups to bid for this business.
Tata group may hive off Tata Power's strategic electronics division and may merge it with two other group companies, Tata Technologies and Tata Advanced Composite Systems. The new entity will specialise in all defence contracts of the group. The division of Tata Power had also signed an agreement with US-based Raytheon for better collaboration in defence and aerospace.
An analyst said: “A lot of foreign military contractors including Lockheed Martin and Rolls Royce are talking to them. It may become a separate entity or a joint venture.”
Tata Power managing director Prasad Menon told Hindustan Times, “Hiving of SED as a separate subsidiary may be a future possibility. But of course, now its part of Tata Power,” he said.
Tata Technologies is specialised in engineering and design works in the aerospace segment while Tata Advanced Composite Systems makes composite materials that have defence and aerospace applications.
The Tata Power division and Larsen & Toubro had together bagged a Rs 200-crore contract to make Pinaka rocket launchers for two regiments of the Indian army.
Larsen & Toubro has its own plans too. Their heavy engineering division, which has Rs 3000 crore worth defence contracts in its kitty, may form a joint venture with either state-owned Hindustan Aeronautics Ltd or a foreign partner like the airbus Industrie parent European Aeronautics Defence and Space company.
A top Larsen & Toubro official said, “We had preliminary discussions with Hindustan Aeronautics for a joint venture for aircraft composites. We have a tie-up with European Aeronautics. As and when opportunity comes, we may go for a special purpose vehicle with equity participation from domestic or foreign partners to bid for larger contracts.”
Larsen & Toubro and European Aeronautics are jointly bidding for electronic warfare system contracts from the defence ministry.
Mahindra & Mahindra is supplying trucks to the army to carry arms and ammunitions and ferry troops. Godrej & Boyce had made composite systems and structurals for super-sonic cruise missile Brahmos. All these private sector companies have obtained licenses for defence production.