Reliance-Dassault JV to execute Rafale deal

Dassault agrees to invest 50% in offsets of the $8.7-bn deal it signed with India to supply 36 of its Rafale fighter jets

The Anil Ambani-led Reliance group on Monday said it had tied up with Dassault Aviation to help the French company spend up to $4.51 billion that it must invest in India as part of a recent fighter jet deal it clinched.

Dassault agreed to invest 50 per cent in so-called offsets of the $8.7 billion deal it signed with India on September 23 to supply 36 of its Rafale fighter jets. Reliance said the offset contract is India's biggest ever.

Reliance, which has virtually no experience of defence manufacturing, hopes to turn into a major defence firm over the coming years. The agreement with Dassault is a bet that Reliance can build manufacturing facilities at Nagpur to feed into Dassault's supply chain, or for future government orders of the Rafale jet.

A person familiar with the agreement said part of the Rs 30,000 crore in offsets would be spent directly on Reliance manufactured products, and the rest would be spent through other Indian manufacturers, depending on which company could best carry out the work.

"The formation of this Joint venture with Reliance Aerospace led by Anil Ambani's Reliance Group illustrates our strong commitment to establish ourselves in India and to develop strategic industrial partnerships under the Make in India policy promoted by the Indian government," Dassault Chief Executive Eric Trappier said in a statement.

"We are delighted to partner a world leader in aviation like Dassault Aviation, and a visionary leader like Eric Trappier. This is a transformational moment for the Indian Aerospace sector and for Reliance Infrastructure's subsidiary Reliance Aerospace," said Anil Ambani, Chairman, Reliance Group.

According to senior executives, Reliance had bid for Rs 84,000 crore in government contracts, but was yet to win any. Other Indian companies with an interest in defence and aerospace include Tata Group, Mahindra Group and Larsen & Toubro.

"The offset contract period is seven years, compared with typically longer period envisaged in other defence contracts. Reliance Defence, at its upcoming greenfield manufacturing facility in Nagpur, will produce subsystems and components and export them to Dassault Aviation for the production of Rafale fighter Jets in France. Besides, the JV will also produce critical components. The components manufactured at Dassault Reliance Aerospace JV facility in India will form the part of Global Supply Chain for Dassault Aviation and other partner companies in other countries," said a source.

India is the world's largest arms importer and requires foreign defence companies to invest a percentage of the value of deals that they have been awarded into the country to help it build its own manufacturing base.