If an order book of R8,000 crore is anything to go by, the Tata Group’s defence business has gotten off to a flying start.
If an order book of R8,000 crore is anything to go by, the Tata Group’s defence business has gotten off to a flying start. Aerospace and defence are among the businesses that have been identified as a future growth driver by chairman Cyrus Mistry and what can help the Tata Group scale up its operations are the capabilities and brand it has created by catering to the procurement needs of large global defence contractors and even the Indian armed forces.
Foremost among its group companies in this space is Tata Advanced Systems (TASL), the unlisted aerospace and defence venture that is a wholly owned subsidiary of Tata Sons, the group’s flagship holding firm. Founded in 2007, it has built an order book of over R4,000 crore, most of it to be exported to global defence companies that subcontracted parts of the orders to TASL. It has 13 projects under execution at present.
TASL, whose operations are based in Hyderabad, makes and supplies structures and systems across platforms like aerospace, missiles, radars and unmanned systems. The systems it supplies pertain to the command and control, and optronics needs of defence equipment. It has another division that focuses on homeland security.
Some of the marquee international tie-ups it has forged in this period include those with Lockheed Martin and Sikorsky to supply airframes for the C-130J military aircraft and S-92 helicopters that the two global companies make, respectively. In October, TASL announced a tie-up with French aircraft maker Airbus to jointly manufacture military planes in India, provided it wins an order, worth around R20,000 crore, to supply these to the Indian Air Force.
Within seven years of commencing operations, TASL has broken even and posted its first consolidated net profit in 2014-15, signalling the potential that this business holds for the future.
According to the company’s filings with the Registrar of Companies, TASL posted a consolidated net profit of R3.27 crore in FY14, against a loss of R44.90 crore in FY13. TASL and its four subsidiaries posted a consolidated turnover of around R454 crore in fiscal 2014 (before any inter-segment revenues that may exist), which the company said was a year-on-year increase of 87%.
Though Sukaran Singh, recently appointed TASL’s managing director and chief executive, holds future projections of revenues and profitability close to his chest, he is confident of his company’s growth potential. “Most tenders issued by the defence ministry have a requirement for value addition in India,” Singh explained during an interview. “So original equipment manufacturers will be attracted to companies (like TASL) that already have the necessary processes, people and infrastructure in place.”
In fact, at its joint ventures like those with Sikorsky and Lockheed Martin, where the foreign partners can now hold up to a 49% stake as per the revised FDI norms, TASL would be keen to offer these entities a higher stake, Singh said. He credits the group’s former chairman Ratan Tata with the vision of entering the defence sector, in view of the potential it holds for the future.