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| 'Exports, defence offset business to drive our growth' | | Q&A: Ashwani Kumar Datt, CMD, Bharat Electronics Ltd |
| Mahesh Kulkarni / Bangalore Nov 17, 2009, 00:30 IST |
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 Bharat Electronics Ltd (BEL), the Bangalore-based public sector unit in the defence sector, is looking at a turnover of Rs 10,000 crore by 2012. Ashwani Kumar Datt, who recently took over as Chairman and Managing Director, spoke to Mahesh Kulkarni on the company’s route to the target. Edited excerpts:
How do you propose to achieve the Rs 10,000 crore turnover target by 2012?
We have set a challenging target because it gives direction to our employees. It is feasible because of some specific things happening. We have done well in the first two quarters of this year. Overall productivity is good and capacities utilised much better. Second, we are having a good order book position. We will convert them into dispatches. The order book is very large for radar and naval systems. Our strategic business units (SBUs) at Ghaziabad and Bangalore are well equipped. We have bagged a huge order for a missile system, for which work is being done at the Bangalore complex. We expect these two SBUs to be contributing 30-40 per cent growth annually.
What is your current order book? How much did you add in the first six months of this fiscal?
The order book is Rs 12,200 crore as on November 1, against Rs 10,000 crore at the beginning of the year. We have added Rs 4,300 crore worth of orders during the first six months this year. We have also executed Rs 2,000 crore worth of orders during the same period. The remaining two quarters will bring us more orders. We expect to add another Rs 2,800 crore worth of orders during the next two quarters. In total, we will end the current year with a turnover of Rs 5,200 crore, about 13 per cent more than last year.
Do you think your current business mix will get you closer to the target?
We expect to grow by about 15 per cent in our existing business. It leaves a gap of about Rs 2,500 crore which will come from new businesses. We need to have success in new businesses.
Which are the focus areas for achieving the target?
One focus area is increase in export business. We have not done well in exports for long years, due to certain reasons. On account of relatively better export orders, we will increase export revenues substantially. Last year, we were at Rs 85 crore. In the next three years, it should reach a value of at least Rs 500 crore. In addition to traditional product exports, we will get the growth from the defence offset business, for which orders are getting finalised. We are waiting for the government to sign the prime contracts. Another growth area is from contract manufacturing, which we are trying to hasten.
How much business do you expect from defence offset opportunities?
We have picked up a $19 million offset business earlier this year for a naval fleet tanker from an Italian company. We expect to sign a similar order of $19 million this year. We did pick up an offset order for LLTR Radar from Thales of France for about $16 million. We are about to sign the contract now. While the offset business takes time to fructify, when it comes to execution we need to deliver faster. This year, we will export $22 million worth of orders. We expect to get substantial business from this sector in the future, which will drive our growth.
What are the opportunities available for you in contract manufacturing?
We are trying to hasten contract manufacturing for global companies. We have upgraded some of our factories to handle those orders. We have started getting some orders, which are currently under test. Some of them are for making a design and prototypes using our R&D capabilities and also our newly acquired rapid prototyping facility. Others can be for doing complex mechanical parts and sub-assemblies. Then, there are the areas of complex multilayered printed circuit boards and specific components for which we have a large facility in our Bangalore complex.
Which specific areas are you looking at to work for overseas companies?
We are entering into fields like avionics and airborne systems. This, again, will be a big opportunity for us. We are trying to become the preferred partners for overseas companies. As a preparation, we have upgraded our seven SBUs to AS 9100, an aerospace specification which is a primary requirement for them to consider us to do products for them. This would be primarily for the Indian Air Force. These foreign companies get orders from the IAF. Our task is to do products as good as other foreign companies and at lower prices than them.
Which companies are you currently expecting to bag orders from?
For fighter aircraft components, we are expecting orders from companies like Boeing, Lockheed Martin and Saab, among others, as far as avionics are concerned. For airborne electronic warfare systems, we are looking at companies like EADS, Thales and Selex. We have been interacting with them and signed more than 30 MoUs, backed by non-disclosure agreements. Many of them are in the stages of finalisation. We are waiting for government approval.
How soon can you sign JVs with these companies?
Realistically, it will take some time to happen. We are trying very hard to sign at least one before the end of this fiscal. Presently, we are in advanced talks with three-four companies in areas like microwave super components and missile electronics. We are still to settle some issues, which will take time. We are trying to resolve the issues and come to a specific agreement as soon as possible.
Is the cap on FDI in the defence sector at 26 per cent affecting your chances of forming joint venture companies with foreign firms?
We are definitely trying to have some arrangements with five-eight companies. We have an issue with one or two companies who have brought up this issue. This comes in focus when we are trying with a company which looks to make higher returns on their investment in some specific technology areas. We have been trying to negotiate with companies in Israel and Europe within the cap available. There are some companies representing to the Government for India for increasing the cap in cases of some specific technologies.
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