L&T to widen tieup with HAL

Hindustan Aeronautics, India's flagship aeronautics firm under the defence ministry, is seriously considering the outsourcing option and the private sector engineering and technology leader, Larsen & Toubro, is actively pitching for a part of the business.

HAL Chairman NR Mohanty and L&T Managing Director AM Naik have both confirmed that talks are on towards this end. L&T, which has in the past made small machine components for HAL, now wants to make major sub-assemblies for both airframes and aircraft engines.

Mohanty says, "We do not want to do everything ourselves." So HAL is actively looking for "partners". L&T, which is keenly interested in public-private partnership, "is ready to invest".

Mohanty elaborates that HAL is open to the idea, but for a deal to materialise, L&T's offer has to be "competitive". Naik says HAL is doing a lot of indigenisation in both military and training aircraft. Part of that work can be outsourced.

In the last financial year (2003-04), HAL marginally improved its growth rates for turnover and net profit. Turnover went up by 18 per cent to Rs 3,690 crore and net profit went up by 14 per cent to Rs 445 crore.

Exports improved dramatically, more than doubling to reach Rs 215 crore. This was mainly due to selling two advanced light helicopters and one Dornier to "friendly countries".

MV Kotwal, head of L&T's heavy engineering business, outlined the company's approach to a Confederation of Indian Industries' audience earlier by emphasising that public-private partnership was essential in an age when import barriers were coming down.

The foreign competition angle weighs heavily with L&T chief Naik, who has been going around the country meeting defence public sector units and asking why India, which has developed nuclear and space technology on its own, should be importing defence hardware so extensively. He is happy that there is a general acceptance of such ideas and "meeting of minds".

Naik has taken pains to reassure the public sector units that he is not after what they are doing themselves, but what they are importing.

"While HAL will continue to integrate and assemble, we are saying why don't we supply sub-assemblies." He has his eyes both on military and training aircraft, which HAL makes.

Mohanty's remark that L&T has to be "competitive", is significant in the context of L&T's self-reliance pitch. On the other hand, analysts have noted that a foray into the new area will require heavy investment.

With the low margin cement business out of the way, L&T can focus more on its core competency, high technology heavy engineering. But to make this work, it will have to mind its costs and compete with global suppliers.

A rich HAL

• L&T wants to make major sub-assemblies for both airframes and aircraft engines of HAL
• HAL open to the idea provided L&T's offer is 'competitive'
• L&T chief reassuring PSUs he is not after what they do themselves, but what they import
• With cement business out of the way, L&T can focus on high technology and heavy engineering