The Kalyani group showcased a prototype howitzer at the Defence Expo last week. Chairman Baba N Kalyani says in an interview with Jyoti Mukul that the Pune-based manufacturing and engineering giant wants to place itself as a major player in the artillery business as India opens defence procurement to private players. Edited excerpts:
How do you view your growth in the defence business?
Our group has been in the segment for decades. We have been a regular supplier of many important items like the T-72 road wheels, ready-to-fill ammunition shells and wheel rims & axles.
A large amount of this equipment is supplied through other OEMs (original equipment manufacturers). Currently, it is less than a per cent of our group's turnover but in 10 years, we should be a major artillery house globally. For this, we first need to get a base in India.
And, the government needs to come out with RFPs (request for proposals) that are make-and-buy-Indian. Under our gun programme, we have come out with the howitzer in less than two years. Now, we need to get the product tested and approved. We are also working on an ultra-light howitzer.
Besides, there will be products like truck-mounted guns and other systems, the L72 gun, ammunition and mine-protected vehicles.
After your venture with Israel's Elbit, are you looking at more tie-ups?
We are looking at organic (increasing the business) and inorganic (through mergers & acquisitions) growth. For this, we are increasing our capability and also creating joint ventures that will allow modern technology to come into our business.
We have established a joint venture with Elbit Systems and are attempting a number of large programmes. We are hopeful this will add significantly to the growth.
There is also a collaboration with SAAB, the Swedish defence conglomerate, for some systems required by the Indian Army.
How will the business be structured between Kalyani Strategic Systems and joint ventures?
Kalyani Systems will be the holding company for the defence sector. Artillery will be under BF Elbit Systems. In future, there could be joint ventures in fields such as electronics and controls. These are areas where we do not have knowledge, so we have to find someone who has the capability. We are good at hardware. As more procurement decisions by the defence ministry happen, all these partnerships will come up.
In which areas in the defence segment do you see new opportunities?
We are focusing on land systems that includes major areas of artillery systems — armoured vehicle upgrades, air defence segments, protected vehicles and precision ammunition. Currently, we have come out with a prototype of a gun. We are not manufacturing right now but it has created huge capability in the company. Our philosophy is to innovate and also get technology.
Does India's defence procurement policy encourage better technology and private investment?
India imports three-fourths of its defence requirement but the new defence procurement policy lays stress on indigenisation. Major opportunities in engineering manufacturing in India lie in power, capital goods, automobiles, oil & gas, railways and defence.
We have a good policy framework but it needs to be operationalised. We also need to cut the length of the acquisition cycle. There are small operational issues with respect to licensing, foreign exchange rate variation and taxes & duties, which need resolution. Opening the defence sector for domestic industry and reducing imports will give a boost to the manufacturing sector in India. The technology that will come with this will have a multiplier effect and will add value to other sectors as well. It should be a strategic mission for this country.