Bharat Electronics Ltd (BEL), the Bangalore-based defence electronics company, is aiming at Rs 10,000-crore turnover by 2012-13. Its thrust areas for achieving the target include offsets business, contract manufacturing and the upcoming Medium Multi-Role Combat Aircraft (MMRCA) deal.
BEL Chairman and Managing Director Ashwani Kumar Datt spoke to Mahesh Kulkarni and Praveen Bose on the company’s road map to achieve the target. Edited excerpts:
There is a demand for increasing the foreign direct investment (FDI) limit in the defence sector to 49 per cent from 26 per cent. Would it be beneficial to BEL?
We might benefit. It becomes easier to start getting things from abroad without much value addition. The defence ministry has one view and the commerce ministry another. We can work out a solution within the 26 per cent, as BEL has strengths of its own. Only in some areas we need some technologies and support from overseas companies.
We do a technology scan every year, and see the technologies where we wish to be in future. BEL, unlike the private sector, does its own testing by increasing its infrastructure and production, installation, etc. We do not lack the strength. Sometimes there are issues such as in missile technology and critical components sourcing from abroad, and we need some technology infusion.
What are the areas where BEL may need outside help?
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There are issues such as missiles and ‘seekers’. These involve cutting-edge technology, which is denied from abroad sometimes and customers will not wait. FDI could help develop ‘seekers’ faster. The technology and information of foreign companies could be higher. Seeker needs technology infusion.
In night vision detectors, too, we want to be in tune with the best. There are specific technology gaps we need to plug. Given the present technology development, we need technology infusion. Primarily for BEL, it should enable us in areas of research and development (R&D).
We are seeking associations to have more and more R&D abilities in specific areas. For this, overseas companies need financial compensation, not a one-time payment. Some think 26 per cent is a limiting factor to enter into a joint venture (JV) with an Indian defence company.
Which are the companies BEL has been wooing for joint ventures? What’s the progress on that front?
BEL is holding discussions with Thales of France on forming a JV in India for civilian and select defence radars. The proposal is in advanced stages of discussions and we expect it to finalise in the next three to six months.
How much would you gain from the offset policy?
We achieved record turnover from exports this year and a large portion of it is from offsets. We are likely to achieve $34 million in exports this year, against $23 million last year. A good portion of exports would come from offsets. Of the $64-million export order book, $40 million is from offsets. With major programmes like the medium multi role combat aircraf (MMRCA) deal likely to get decided soon, offsets from bigger programmes in the aerospace sector to BEL would be substantial in the next financial year. BEL is in talks with many Tier-I and Tier-II companies, which are in these programmes. We have spent a lot of money on upgrading seven strategic business units and manufacturing facilities to do aerospace business. In the next one or two years, offsets business would be in a fast lane.
What kind of opportunities are you expecting from the MMRCA deal?
Values are difficult to tell, but they will be substantial. We are in talks with all, irrespective of who gets the order. In the next five years, we expect at least $500 million in orders from offsets, including the MMRCA deal. We estimate that the percentage of BEL’s share from offsets will be around eight per cent of the possible offsets business.
Among the request for proposals (RFPs) issued so far, about 80 per cent of the total acquisition by the defence ministry is for air platforms and the rest for naval platforms, gun programme, radar and missile systems. The percentage of BEL’s share from offset may improve when more RFPs are issued.
What steps has BEL taken to take advantage of the mandatory offset clause in RFPs for Indian defence procurement?
BEL has signed memoranda of understanding (MoUs) with major aerospace and defence companies to take advantage of the mandatory Offset Clause in RFPs.
In addition, BEL has planned plant upgrades in identified areas to address these opportunities. BEL has identified homeland security as a focus area and has initiated development of state-of-the-art night vision devices, jammers, among others. As the current defence procurement policy allows for offset in inland security, BEL expects to gain substantially through these efforts.
Two years ago, BEL set a target of Rs 10,000-crore turnover by 2012-13. Are you on course to meet this?
We are working out strategies to achieve it. The thrust areas are network centric warfare, opto-electronics, electronic warfare & radar, and security systems. In addition to offsets business, contract manufacturing is also a focus area. We are on course to achieve a turnover of Rs 5,700 crore by March 2011 and have an order book of Rs 16,000 crore as of now. By the end of this year, we expect another Rs 5,000 crore worth orders. If not in 2012-13, we will definitely achieve the target one year later.
How are you preparing for the Aero India show and what are your expectations?
The preparations are on in full swing. We are in advanced stages of discussions with a few proposed JV partners. We are also discussing cooperation with OEMs and some MoUs may get signed during Aero India 2011. BEL will showcase indigenously developed network centric warfare technologies such as command and control system, multi-sensor tracking, situation simulator and tactical algorithm for air defence applications, battlefield management system and coastal surveillance system.
BEL will also showcase its inherent R&D capabilities by demonstrating some of its new products/technologies, including software-defined radios, next generation bulk encryptor, and high data tactical radio, among others.