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| L&T signs JV with EADS for defence equipment |
| BS Reporters / Mumbai May 06, 2009, 00:50 IST |
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 Larsen and Toubro (L&T), the engineering and construction giant, will float a joint venture (JV) with the largest defence equipment maker in Europe, EADS Defence and Security, to tap the Rs 50,000 crore Indian defence market.
The JV’s formation is subject to approval by the Indian government.
The JV, which intends to supply defence electronic equipment globally, will initially invest Rs 100 crore for building its first manufacturing unit at Talegaon near Pune, according to AM Naik, chairman and managing director of L&T.
The new company intends to design, develop and manufacture electronic warfare equipment, radars, military avionics and mobile systems for military requirements.
EADS is a global leader in aerospace, defence and related services, and is a subsidiary of Defence Electronics (DE), a supplier of defence solutions worldwide. DE had global revenues of $43.2 billion in 2008, with 118,000 employees; EADS revenues in 2008 were $5.7 billion.
EADS wants to create an industrial base in India with a long-term view, according to Stefan Zoller, its chief executive.
L&T would invest about Rs 2,000 crore over the next three years on defence-related business, said Naik. “Of this, Rs 1,500 crore is what we are spending for the defence shipyard at Ennore,” Naik told reporters, referring to the venture in south India. He said the remainder would be spent on expansion of existing facilities.
“By the beginning of 2010, the joint venture will be ready to receive contracts. We are expecting $500 million (about Rs 2,500 crore) annual revenue in the next five to seven years,” said Naik.
The new company can have a foreign holding of up to 26 per cent under the norms for defence-equipment manufacturers. “Equity holdings will be in compliance with government guidelines,” said MV Kotwal, senior vice-president, heavy engineering, L&T.
India plans to invest around $60 billion by 2015 for buying defence systems — including fighter jets, warships and artillery. With an eye on the defence pie, foreign companies form JVs with Indian firms since they have to meet certain domestic sourcing requirements for getting contracts worth more than $300 million.
L&T has already signed co-operation agreements with three major nuclear reactor makers. These are Atomstroyexport (ASE), part of Rosatom of Russia, Toshiba Westinghouse of the US and Atomic Energy of Canada (AEC). The company is also in talks with General Electric Hitachi of the US and Areva of France.
On Tuesday, L&T shares were up 2.77 per cent and closed at Rs 978.75.
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