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| Axis aerospace ventures to consolidate |
| Raghuvir Badrinath / Chennai/ Bangalore Sep 14, 2011, 00:34 IST |
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Rajeev Chandrasekhar, Rajya Sabha MP and serial entrepreneur, who exited BPL Mobile with its sale to the Essar Group for an enterprise value of $1.2 billion, may be well known as the man who is consolidating and emerging as a major player in the regional media business in South India.
Another aspect of his business which is growing in prominence is the aerospace and defence technology services under Axis Aerospace & Technologies. On Monday, the company announced a consolidation move in which three of his various companies he had acquired in this sector are being merged to create — Axis Aerospace & Technologies. The combined entity will have 1,600 people, with a presence across 10 countries and many of the marquee global aerospace, defence and automobile companies among its clients and with a cumulative revenue of close to $100 million.
The combined entity, according to investment bankers close to Axis Aerospace, is expected to raise around $50 million going forward to scale up this business and have a major say in the defence and aerospace technology services. While a lot of software services companies have this vertical (defence & aerospace technology) as part of their end-to-end offerings, there are very few niche companies who solely focus on this vertical which is set for a major growth given the slew of offset deals expected to come India’s way.
Sudhakar Gande, vice-chairman, Axis Aerospace & Technologies while declining to comment on the fund raise, said that the consolidation will enable them to grow in size and compete with global players in bagging major contracts. Investment bankers further indicate that Axis Aerospace is close to bagging a $100 million offset deal shortly.
This move by Axis Aerospace to consolidate comes close on the heels of it bagging a major deal from Airbus, which will envisage Airbus collaborating with few Indian players including — Axis Aerospace, to improve offshoring capability and to build a strong engineering talent pool in India.
As part of this effort, Airbus will have an Offshore Development Centre (ODC) model which is being tried by it for the first time anywhere in the world. The ODC model includes a commitment by Airbus to partner with Indian suppliers, handhold them in training and execution, and depute technical managers to manage these ODCs until they reach a level of maturity. This process may take at least two years for each such unit.
As a part of this process, Airbus had selected Bangalore-headquartered CADES (now being merged into Axis Aerospace) as their ODC partner for fuselage design activities. According to industry analysts, Airbus outsources nearly $3 billion worth of work to global suppliers annually, but the cumulative value of orders obtained by Indian companies put together are less than three per cent of this. The reasons, being inability of Indian companies to climb up the aerospace engineering value chain and to provide total solutions.
“Global companies like Assystem, Ferchau, Altran and AKKA receive and execute close to $2 billion worth of engineering services every year for Airbus, while four Indian companies — Infosys, Mahindra Satyam, CADES and Quest — execute orders worth about $40 million between them for Airbus,” an industry analyst said.
According to industry estimates, there are less than 10,000 trained aerospace engineers in India and very few of them can do conceptual-level or design authorisation, a must for high value contracts. Airbus is a major player in the growth of Indian aviation. It also started an Airbus Engineering Center in India during 2006. Industry analysts say the fresh contract from Airbus can go up to as much as $300 million over a few years, based on the progress of the vendors.
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