Defence will be Rs 500-crore-a-day opportunity in 10 years: Lalit Jalan

Interview with group director (strategy and corporate affairs), Reliance Anil Dhirubhai Ambani Group

Lalit Jalan, group director (strategy and corporate affairs), Reliance Anil Dhirubhai Ambani Group, is running against time to beat the deadline on asset sale deals, including the ones for the group's cement and tower businesses, which are to be closed this quarter. He tells Joydeep Ghosh and Abhineet Kumar that the group has decided to turn its focus away from capital-intensive sectors like roads and cement to new areas with low-gestation period like defence. Excerpts:

The group is going through a massive exercise to bring down its debt. How realistic are the deadlines?

On an overall basis, we expect to reduce our debt by over Rs 50,000 crore out of approximately Rs 100,000 crore (excluding lending business) by March 2017. Individually, we have already made announcements in Reliance Communications, Reliance Infrastructure and Reliance Capital, and we might make a few more announcements by March 2016. We expect all these transactions to be completed by March 2017. We hope to be debt free, on a standalone basis in Reliance Infrastructure and Reliance Communications.

What has compelled the sale of assets and divestment of businesses such as cement?

New growth opportunities have emerged with the change in government at the Centre and its policy push towards Make in India, Smart Cities, Digital India & enhancing private sector participation in defence and railways. In light of the above developments, the group has decided to adopt an asset-light model.

After this sharp reduction in debt, what will be the growth areas for the group?

We have a leadership position in all our existing businesses. While we will continue to invest in these businesses, defence has emerged as a major new growth driver for the group.

What kind of investments do you intend to make in the defence business?

We continue to invest in our existing businesses like power, telecom and financial services. Defence will be our future growth driver as we strongly believe it is a sunrise sector as it has relatively lower capital intensity, low gestation period, negative working capital with minimal regulatory uncertainties and potential for superior return on equity unlike big ticket infrastructure or UMPP projects.

The opportunity in defence is expected to be Rs 20 lakh crore over the next 10 years - or Rs 500 crore a day. This will be driven by the government's Make in India & Skill India programmes and we expect to see good order flows in the sector shortly.

Till now, we have invested over Rs 1,700 crore to acquire Pipavav Defence & Engineering, which will be a naval centre of excellence. We will invest another Rs 150-200 crore to set up facilities on the lines of the Dhirubhai Ambani Aerospace Park in Mihan to manufacture aerospace equipment for both commercial and military applications. We have also hired several experts from the defence industry in leadership positions.