The defence offset policy has given an opportunity for Bharat Electronics Ltd (BEL) to grow its export revenue manifold as the company is working to close more offset deals in the coming years.
The defence navaratna PSU has set a target of $400 million in exports revenue in the next 4-5 years, and 75% of it could come through offset business, said Ashwani Kumar Datt, chairman and managing director of BEL.
The defence offset policy stipulates that foreign contractors catering to the armed forces should source systems and components from local vendors for at least 30% of the value of orders of more than Rs 300 crore. Nearly 80% of offsets are in the area of aerospace. According to the Union ministry of defence, the offset opportunity will grow to $ 10 billion in the next five years.
BEL, as an established player in communication and electronic warfare devices, has put in an intense effort to garner offset orders. Although the company has to face tough competition from the private sector players in areas like Printed Circuit Board (PCB), micro components and other smaller electronic devices, it enjoys monopoly in larger communication systems like radar and aerospace and navy related communication equipment.
In fact in 2009-10, the company?s export revenue increased by 33% to $ 23.65 million, of which around $ 13 million worth business achieved through offset contracts from foreign companies, Datt said. The company has set a target of $ 32 million in exports in 2010-11 with an expected offset business of $ 25 million, he added.
The defence ministry?s offset programme, which is active since last three years, has become as a great support for BEL?s export business as the company was struggling to market its products in developed nations. According to H N Ramakrishna, director for marketing in BEL, the company has a two pronged strategy to increase its exports. One is through exporting products to developing nations in the regions of Latin America and South Asia and SAARC countries. Another is through the offset business from companies in developed countries.
The company has signed MoUs with 10 European and US companies for offset business while many other foreign companies are negotiating with BEL for tie-ups. So far BEL has signed MoUs with the foreign aerospace majors like Boeing, Lockheed Martin, Rockwell Collins, Northrop Grumman and Israel-based IAI Group of Companies, Thales Group, BAE Systems and Fincantieri of Italy.
The current export order book of BEL stood at $ 71.26 million that includes an offset order book of $ 59.31 million. Of this, $48 million worth offset orders were bagged in a single financial year of 2009-10. One of the major export orders executed during the year was $ 9.56 million offset order from Italy-based Fincantieri for the supply of data link and composite communication systems, versatile communication system and V/UHF search receiver with DF System. This is for installation and integration on board the fleet tanker being supplied by Fincantieri to the Indian Navy.