MUMBAI: The Tata Group‘s defence play started in 1958 with Tata Motors supplying vehicles to the country’s armed forces. But over the years, the conglomerate’s defence interests remained limited mainly because of government policies and also revenues from this business were nothing home to write about. The scenario is changing now. With the government intending to turn India, which is the world’s largest arms importer, into a heavyweight manufacturer, the group is betting big on defence and aerospace and is expecting the business to become worth a billion-dollar in the next five to six years. This fiscal, the group’s revenues from the segment, which chairman Cyrus Mistry has identified as the enterprise’s new growth engine, will cross Rs 2,600 crore ($411 million).
In the last five years, revenue from defence and aerospace has grown at a compound rate of 18%. It should continue to grow at a compound rate of at least 12%, said a top Tata executive.
The conglomerate through group companies_Tata Advanced Systems, Tata Motors, Tata Power- strategic engineering division, Tata Consultancy Services and Titan-precision engineering division_has an order book of Rs 10,000 crore ($1.6 billion) for fiscal 2017. “With the government aiming to procure 70% of defence equipment locally, the opportunities are immense” said VS Noronha, VP-defence and government business, Tata Motors. Defence contributes 3% to Tata Motors’ India revenues and the company currently has an order book of Rs 900 crore from defence.
India plans to spend $100 billion towards modernizing its military and it wants to spend this amount in the domestic market, and not on importing surveillance planes, combat ships and ground vehicles. The aim is to end the country’s reliance on imports that have made it the world’s top buyer of weapons.
Over two dozen Tata entities have a presence in defence and for certain contracts, they join hands to form consortium, leveraging on in-house expertise in various fields. They have also allied with top foreign names like Sikorsy and Lockheed Martin to increase their know-how in the defence and aerospace sector. Besides, to up its skill set, they have been hiring expats with technical experience in the field. “We have brought on board people with domain expertise from US and Europe and have put Indian leadership under their shadow to get them trained” said Sukaran Singh, CEO & MD, Tata Advanced Systems, the group’s flagship defence company, which currently has an order book of Rs 4,500 crore.