Defence sector will be the largest business area for Reliance Group in the next few years, its chairman Anil Ambani has said, seeing opportunities worth Rs 1 lakh crore per annum in acquisitions for the armed forces. Ambani said the Group’s focus will be to become a leading manufacturer and supplier of advanced weapon platforms and military hardware to meet the requirements of the Navy, Indian Air Force and the Army and also mark the company’s presence across the world. Briefing over 80 analysts last evening about future plans of his group in the defence sector, the industrialist said there is a huge opportunity for private sector in the defence business as currently India imports 70 per cent of its requirement (in value terms) and accounted for 14 per cent of the global defence imports in 2016.
According to the analysts present at the meet, Ambani also said there is over Rs 70,000 crore worth of offset obligation which is yet to be executed, which is a big playing field for Indian private sector.
He further said that Reliance Group’s entry into defence sector is driven by the government’s Make in India and Skill India policies, which provide a large opportunity for the group.
You may also like to watch:
“There are opportunities worth Rs 15 lakh core over the next 15 years in the defence sector across Air Force, Navy, Army and integrated security. That means there is a business opportunity of Rs 1 lakh crore per annum in the Indian defence sector,” according to a presentation made at the meet.
It was the first time ever that Ambani or his group hosted an analyst meet for defence business.
“In the years to come, defence will emerge the largest business of Reliance Group and Reliance Infrastructure. Contrary to the general perception, defence is not a capital intensive business. It has medium to light capital intensity,” Ambani told the analysts.
There are more than 2,000 people in Reliance Defence at present including a 200-strong management team.
The Reliance Group’s defence play started with the acquisition of Gujarat-based Pipavav Shipyard about two years ago. This remains the largest acquisition in the defence sector in India so far.
Pipavav Shipyard has now been renamed as Reliance Defence and Engineering Ltd (RDEL). It owns the largest dry dock in the country.
According to the analysts, the group has pegged the current order book of RDEL at Rs 5,700 crore which would be completed by January 2021. This include five naval offshore patrol vessels, one cadet training ship, normal refits of naval ships Jamuna, Savitri and Deepak; offshore supply vessels, two oil rigs, one Panamax Bulk Carriers and 14 Fast Patrol Vessels (FPVs).
Besides, RDEL has submitted bids for two prestigious programmes of Indian Navy, whose combined value is Rs 30,000 crore and bids are expected to open in next few weeks, the analysts said, while quoting from the presentation at the meet.
Reliance Infrastructure, the listed entity from the group, also said in a regulatory filing today that an analyst meet was held yesterday to give update on its defence business plans.
Sharing ‘key highlights’ of the presentation made at the analyst meet, the company said the global defence market is estimated at USD 1.8 trillion and India with a spending of USD 51 billion in the year 2016 has moved up to 4th position from 6th position in the year 2015.
Recently, the Reliance Group also entered into a joint venture with Dassault Aviation of France to execute the largest offset obligation against the 36 Rafale fighter jets bought by India.
For this, the company is setting up manufacturing facilities in Mihan SEZ in Nagpur.
Reliance Defence plans to have a separate strategic focus on common defence technologies like Radars, electro-optics, underwater systems, missiles and guided weapons, avionics and communication and electronic warfare.
RDEL also plans to participate in two programmes worth Rs 30,000 crore for which bids will be submitted in 2017 and orders will come in 2018. These include Next Generation Missile Vessels (worth Rs 12,000 crore) and Next Generation Corvette (worth Rs 17,500 crore).
According to the presentation, other Navy projects where RDEL is well positioned to participate are two Indigenous Aircraft Carriers (Rs 90,000 crore) and 12 submarines (Rs 1,20,000 crore).
Besides, RDEL is also targeting non-defence opportunities for its shipyard with c combined order value of Rs 15,000 crore, which takes the total targeted business opportunity for the company in next 3-5 years to Rs 2,85,000 crore.
On opportunities in the aerospace sector, the group said more than Rs 5 lakh crore of Indian Aerospace programs are expected to awarded in the next 15 years and Reliance Defence has taken a lead in this segment.
“Rafale Offset Contract, largest ever in India, to be the nucleus of Aerospace eco-system in the country.
“Dassault Reliance Aerospace Limited is to be a key player along with more than 100 SMEs and MSMEs in meeting the offset obligation of approximately Rs 30,000 crore for ‘Rafael 36’ contract,” it said while adding that the JV is expected to execute additional orders of Rafael Fighter Aircraft, if awarded, for Indian Armed Forces under ‘Make in India’.