Ashok Leyland sets its sights high in defence
It wants to grow 10-fold in five years through strategic alliances
T E Narasimhan | Chennai April 7, 2016 Last Updated at 21:06 IST
Last month, Ashok Leyland Defence Systems, a division of Hinduja group's flagship, Ashok Leyland, roped in US-based defence contractor Lockheed Martin to develop combat vehicles for the Indian Army.
The Stallion has been the most successful product from Ashok Leyland’s defence arm so far
The technology sourcing agreement with Lockheed is the latest in a string of partnership deals from Ashok Leylandto step up its defence play and to reach a turnover of Rs 5,000 core over the next five years.
This, by any stretch of imagination, is an ambitious target, given that its current revenue is a little over Rs 600 core. However, it may not be entirely unachievable.
Since its inception in 1998, Ashok Leyland's defence arm has relied heavily on strategic alliances to win big contracts. Over the past decade, it has signed three deals with overseas players to boost its technological know-how. It is now looking to do the same with Lockheed.
Nitin Seth, president (light commercial vehicle & defence), Ashok Leyland, says the right technological support is critical to the success of a company trying to make a mark in defence manufacturing, given the huge initial costs involved in developing products.
"It is not that we cannot develop our own technology, but considering the time it takes and the money that is required (Rs 400-Rs 500 crore), it is better to source (platforms) which are in service," says Seth.
The latest deal, for instance, will allow Ashok Leyland to use Lockheed's platforms for its light-specialist vehicles (LSV) and light-armoured multipurpose (LAM) vehicles. In addition to giving it a foothold in the $1-billion armoured vehicle market in India, the tie-up will significantly boost its overall capabilities in providing mobility solutions for the army.
Defence mobility is one area Ashok Leyland is betting on heavily. Already, it is the largest supplier of medium- and-heavy vehicles to the army. Its warhorse, the Stallion, was used to carry troops to the battlefield during the Kargil war, and from 400 Stallions in 1998, the army today has over 70,000 Stallions, accounting for almost 80 per cent of its fleet of big vehicles.
Backed by Lockheed's technological support, Ashok Leyland is looking to bid for LSV and LAM vehicle programmes of the Indian Army. It believes the tie up will significantly shrink the time taken to develop the vehicle and also help it keep the costs low, as it won't have to start manufacturing from scratch.
A shot in the arm
If Ashok Leyland becomes a supplier of LSV and LAM vehicles, its revenue could straightaway get a boost of Rs 5,000 crore. Then, there is also the scope for recurring demand as the army doesn't change its models frequently. This means the business from these programmes could be four or five times bigger than what is believed today.
Ashok Leyland, however, is not banking on armoured vehicles alone to reach the Rs 5,000 crore target. It has also joined hands with Sweden's defence and security company Saab and is looking for an alliance with Bharat Forge to produce vehicles to carry guns and missiles. The idea, the company says, is to have a wide range of products under one roof to meet all requirements of the army.
So far this strategy has proved fruitful. Out of the 14 tenders to supply medium and heavy trucks floated over the past year, Ashok Leyland claims to be in the final stages (L1 stage) of at least 12 of these. However, it has not disclosed the deal value yet.
This means Ashok Leyland is proving to be cost-competitive in India. One way, it has achieved this is by localising production as much as possible. "In order to have a viable business in defence, one should have at least over 80 per cent localisation but for certain products we have achieved almost 100 per cent localisation," says Seth.
Its strengths are clearly reflected in its order book. It recently bagged a Rs 800-crore tender to supply 450 artillery tractors and Stallions and 825 ambulances to the army.
Yet, its future is not without challenges. Other major players, including Tata Advanced Systems, Mahindra Defence Systems and Bharat Forge, are also keen on the LSV and LAM programmes, increasing competition in the space.
This is the first time the Indian army has called for bids for these vehicles (1,300 LSV and 700 LAMs). Equipped with sophisticated technology, including thermal imaging and mounted machine guns, these vehicles are highly effective in combing and patrolling operations, be it within the city or along the border.
While the vehicle is popular worldwide, especially with the armies in the US, the UK and Iraq, it cannot be imported because the specifications for speed, power and weight differ based on local conditions.
Seth says while Ashok Leyland has a head-start with the platform provided by Lockheed, it will still have to make heavy investments in redesigning the product to acclimatise it to Indian conditions. Currently, the prototype of the vehicle, along with that of two other companies, is in the testing stage with the army. If Ashok Leyland wins the commercial bid, it will be in a position to start manufacturing by 2019.
However, because it takes a long time for defence contracts to materialise and the outcome even after the gestation period is unpredictable, the company is also looking at exports to safeguard its interests.
I don't think this would be a good idea as there is a thread already running covering psu's
you are right they have a miniscule R&D budget because they believe in quick profitsWhat's the R&D budget for each of these defence companies?
I am going to research on it and post it here. By becoming a sweatshop we won't achieve autonomy. We need R&D. What was done in Tejas project X 100.
And Indian firms need to start channeling their thought process along those lines. This short-term kirana shop mindset will not fetch long term returns.
Isreal should focus on futuristic and high tech research and transfer manufacturing to India. Win win for bothWipro Infra Engg to acquired Israel based Givon in all-cash deal
Deal will help acquirer expand product portfolio and global footprint, and strengthen customer ties in Aviation and Aerospace
BS Reporter | Pune August 1, 2016 Last Updated at 18:26 IST
Wipro Infrastructure Engineering (WIN), hydraulic solutions provider and part of Wipro Enterprise, today announced that it has signed a definitive agreement to acquire HR Givon(Givon), an Israel-headquartered manufacturer of metallic parts and assemblies for the Aerospace industry, in an all-cash deal.
Givon manufactures structural parts and assemblies which form part of the fuselage, wings and empennage of an aircraft. The 46-year-old company is a certified Tier-1 supplier and counts leading global original equipment manufacturers (OEM) among its customers. It has three manufacturing plants, two in Israel and one at Everett, Washington in the US.
This acquisition will help WIN broaden its product portfolio, expand global footprint and strengthen customer relationships in the Aviation and Aerospace industry.
"Givon has a strong tradition of technical expertise and enduring client relationships. I am confident that Wipro and Givon together will be a significant force in key markets. The synergies from our combined portfolio and locational proximity will be a key enabler to build and nurture successful customer relationships," said Pratik Kumar, Chief Executive Officer, Wipro Infrastructure Engineering.
India is the largest buyer of Israeli military equipment while Israel is the second-largest defense supplier to India after Russia. Independent estimates put the potential offset opportunities at $10 billion and the acquisition of H.R Givon will strengthen WIN's ability to address this market.
WIN sees the Aerospace industry as strategic to its future. In 2013, WIN set up India's first Aerospace actuator manufacturing facility at the Devanahalli Special Economic Zone, near the Bangalore International Airport. Plans are on the anvil to expand into multiple product lines and enter into technology partnerships with leading Aerospace companies.
"We are delighted with the opportunity to join hands with Wipro and this gives us an opportunity to bring to the market an expanded range of offerings," said Ronen Givon, Chief Executive Officer, Givon.
"We see cross-synergies in customer relationships, products and technology that can be leveraged to strengthen our presence in the growing Aerospace sector and become a partner of choice for global OEMs and Tier-1s," noted Sunil Rajagopalan, Business Head (Aerospace) of Wipro Infrastructure Engineering.
The acquisition is subject to customary closing conditions and regulatory approvals, which are expected to be completed in September 2016.
WIN has a global workforce of over 1,700 and has 13 state-of-the-art manufacturing facilities spread across India, Europe, USA and Brazil, making it one of the largest Independent Hydraulic Actuator Manufacturers in the World. Its Aerospace manufacturing facility for Actuators and Precision Engineered Components is located at Bangalore, India.
Givon founded in 1970 by Ruth and Haim Givon as a family-owned business, H.R Givon (Givon) has grown to be Israel's largest manufacturer of metallic aerostructure parts and assemblies.
Isreal should focus on futuristic and high tech research and transfer manufacturing to India. Win win for both