M&M may pip Tatas, L&T for BAE's venture

Indian conglomerate Mahindra and Mahindra is understood to have emerged as a preferred partner of international defence equipment major BAE Systems for a manufacturing joint venture in India.

The UK-based BAE Systems has zeroed in on M&M and is believed to have signed a Memorandum of Understanding (MoU) after holding talks with at least two other leading corporates, Tatas and Larsen and Toubro (L&T), for its Indian Land Systems project, sources close to the development said.

The MoU would prove to be a big morale booster for the Mahindras, which is competing with the Tatas for acquisition of auto giant Ford's global luxury brands Jaguar and Land Rover, revised bids for which were submitted on Wednesday last.

The proposed JV will manufacture combat vehicles and other land-based defence equipment. Sources said that the project would cater to the Indian Army besides looking for exports from the Indian soil.

When contacted, BAE Systems' Media Relations Director John Neilson said, "BAE Systems has made no secret of its ambitions to develop its partnership with India and continues to have discussions with potential industrial partners in the country."

Until such time as these discussions are completed, it would be premature to predict their outcome, he said when asked about the signing of the MoU with M&M earlier this week. Officials of the Indian company could not be contacted for comments.

Next step after the MoU would be the creation of a joint venture, for which the two sides would soon approach the authorities for necessary regulatory approvals. A government nod is mandatory in India for defence production.

Mahindras have also developed a land system called Axe, known as an Indian version of American Hummer's military variant. Mahindra Defence Systems currently manufactures vehicles based on its own technology for the Indian Army.

M&M is currently in the process of setting up a special military vehicle plant at Palwal in Haryana, where it would manufacture Axe and its variants for civilian law enforcement roles.

The $ 6-billion Mahindra Group is among India's top 10 industrial houses. M&M is the country's largest and ranks among the world's top three tractor manufacturers.

The group is present across various sectors including financial services, logistics, automotive, IT and infrastructure. Globally, the group is present in five continents and has plants in the US, China, Australia.

BAE Systems recently acquired Armor Holdings of the US, a leading manufacturer of military, law enforcement and personnel safety equipment. In India, BAE Systems tied up with Hindustan Aeronautics (HAL) last year for manufacturing an advanced jet trainer aircraft Hawk.

Of late, there had been significant interest from the leading corporates such as M&M, Tatas and L&T in the defence equipment market.