Mahindra Aerospace, part of the $15.4-billion Mahindra Group, will only manufacture civilian aircraft, although it had planned to venture into the military and defence business. Thus the company, India?s first small aircraft maker from the private sector that was set up in 2003, will be out of the race for defence offset deals worth close to $6 billion arising from the pact with Dassault Aviation for 126 fighter Rafale jets.
In a board meeting earlier this year, Mahindra Aerospace decided to amend its Memorandum of Association and Article of Association, documents required to form a company, and remove ?military/defence? from the clause defining the business purpose of the company.
?Currently, the main object of the company empowers it to undertake business activities for military/defence purposes. The company does not undertake business activities in the sector and also does not envisage undertaking the said business in the near future,? Mahindra Aerospace board said in the resolution passed on February 6.
Experts, however, believe this is a good move as there would have been ?little to gain? from going in for the offset deals.
?There is very little technology transfer that happens in such deals, so apart from the business, Mahindra Aerospace would have little to gain from the defence offset deals,? said a consultant with a global audit and consultancy firm. ?Typically, companies engaging in such joint ventures or defence offset deals are tied up for a good number of years acting as manufacturers or assemblers.?
?In fact, the better option for Mahindra Aerospace is the regional aviation market which I believe will be the next big change in Indian aviation,? the consultant added. ?Demand for small aircraft will shoot up in the next 5-10 years and Mahindra?s investments till now will pay off then.?
In 2009, Mahindra Aerospace bought Australian small aircraft maker Gippsland Aeronautics. Apart from the existing products of GippsAero, the company has since developed a 10-seater aircraft. Mahindra Aerospace is also developing a small aircraft with National Aeronautical Laboratories for civilan purposes.
Mahindra Aerospace has a plant in Australia and has also invested R40 crore to build a manufacturing plant near Bangalore.
But the company has plans for aggressive investments. At a board meeting held on August 22, the company increased its authorised share capital by R25 crore. The second such instance of raising the share capital within a year. ?In view of the growing needs of finance, it is proposed to issue further equity shares,? the board of directors stated. The fresh shares were issued to Mahindra & Mahindra, Kotak Mahindra Trusteeship Services, Kotak India Private Equity Fund and Kotak Investment Advisors.
As per information from the Registrar of Companies, Mahindra Aerospace?s credit limit was more than doubled to R79.75 crore by Axis Bank on September 18. The company didn?t respond to an email query sent by FE seeking details of investment plans. As of March 31, it had revenues of R1.18 crore while it?s net loss was at R3.55 crore.
