How Reliance Group Chairman Anil Ambani is readying his companies to target big-ticket defence projects
These days, the Reliance Group boss spends more than 70% of his working hours on what is seen as a sunrise sector for Indian industry. In the past year, he visited at least two global defence equipment manufacturers every month and signed partnerships with several of them. In between, from Paris to Dubai, Moscow and Abu Dhabi, he hasn’t missed any major defence and aerospace shows.
A country that spends more than $40 billion every year in defence, India is still largely dependent on imports to meet military requirements.
The government’s Make in India campaign to boost domestic manufacturing has opened up opportunities for Ambani’s Reliance Infrastructure, but he will also have to compete with more established players like the Mahindra and Tata groups and Larsen & Toubro. These companies have been building capacity and gathering technology in the sector for the past few years.
“Prime Minister (Narendra) Modi and Defence Minister (Manohar) Parrikar have reposed tremendous faith in the dynamism and strength of India’s private sector and the critical role it can play in the development of our defence infrastructure,” Ambani told ET during a recent interaction.
For Ambani, it began with the acquisition of a controlling stake in Pipavav Shipyard last year by Reliance Infrastructure, which has since been slowly transforming into a defence-first company.
Under its Reliance Defence unit, Reliance Infra floated a cluster of companies and made a host of high-profile hiring, from the former India head of US defence contractor Lockheed Martin to top-ranked retired officers of the armed forces. It is seeking to rapidly set up manufacturing infrastructure — primarily two defence parks to make aircraft to armoured vehicles and air defence systems, and a shipyard on the east coast.
Misses, And No Hits Yet Even so, Reliance Infra’s new entities have yet to win a single order. And, there have been a couple of misses, too, such as the Kamov 226 helicopter manufacturing contract with the Russians that went to Hindustan Aeronautics. But the company isn’t worried.
The defence ministry’s new procurement policy, which has been in the works for over a year, is nearing finalisation. Once the policy is ready, with its thrust on local sourcing, order flow is sure to pick up.
Reliance Infra has obtained more than a dozen industrial licences that executives say will target a domestic market of over Rs 5.69 lakh crore over the next decade. Winning a contract, typically, involves a three-year process. Tie-ups have been made across the globe to ensure technology and expertise. In France, it has an understanding with Thales on underwater systems while in Russia it is targeting warship building with the United Shipbuilding Corporation (USC).
In Ukraine, the company has established an agreement with Antonov for military transport aircraft. It is a prime partner for the offset contracts under the Rafale fighter jet deal with France that will make it compulsory for French companies to spend nearly Rs 30,000 crore in the Indian defence and aerospace sector. While the company refuses to talk on the project, people familiar with the matter told ET that it is set to get a major part of the work — including a possible assembly line for a low-cost Falcon executive jet.
“It is both a bold move for a premier infrastructure player as well as a testament to the steps taken by the MoD (Ministry of Defence) to ‘ease’ private sector defence participation,” says Ankur Gupta, vice president-defence at EY.
Power Team ::
A key team of four is driving the company’s plan to become a systems integrator. Business development is led by Rajesh Dhingra, the former Lockheed Martin India managing director and a former air force officer. A three-member execution team of former army, navy and air force officers will deliver on production orders. “In the last one year at Reliance Defence, we have invested in planning, prioritising, people and partnerships,” says Dhingra.
At Lockheed Martin, Dhingra led the discussions with the Indian Air Force to sell the C 130 J transport aircraft. He is now Ambani’s key man on identifying opportunities, striking joint ventures and making decisions on defence contracts.
The execution team has direct exposure to government procurement. Air Marshal M Matheswaran heads the aerospace business, Vice Admiral HS Malhi oversees the marine side and Lt Gen MS Bhuttar is in charge of land systems. The naval business of the company — the one it is most heavily invested in — includes Vice Admiral KN Sushil as president of the submarine business. The retired officer has hands-on experience with nuclear submarine construction: he was the project director for the Arihant nuclear submarine and had supervised the special submarine project as assistant chief of naval staff.
Besides Pipavav, Reliance has announced an ambitious plan to build a new shipyard on the eastern coast. The aim is to construct a yard at Rambilli near Vizag — where INS Varsha, India’s nuclear naval base with underground pens (bunkers) is coming up — with a Rs 5,000 crore investment. The aim is to build nuclear submarines for the navy.
Malhi, who earlier headed Mazagon Docks in Mumbai that is constructing the Scorpene submarines for the navy, is now heading Pipavav where the new ‘Dhirubhai Ambani Naval Park’ is being set up. The yard is targeting major submarine and aircraft carrier refits as well as plans to produce improved Krivak class frigates in partnership with Russia.
Matheswaran, until recently a strategic adviser to Hindustan Aeronautics, will supervise the setting up on an aerospace park in Nagpur. Reliance plans to assemble and manufacture fixed-wing and rotary-wing military and civilian aircraft at this new plant, work for which has already started. For land systems, the man in charge is Lt Gen Bhuttar, a former director general of weapons and equipment at the army headquarters.
His task at hand is to set up the Dhirubhai Ambani Defence Park at Indore SEZ, to manufacture land systems ranging from armoured fighting vehicles, light armoured multi-purpose vehicles and gun turrets to artillery and air defence systems.
The company has also hired someone to focus on one of India’s largest defence suppliers: Russia. Retired Vice Admiral Ganesh Mahadevan, president of strategic business initiatives, is a Russian expert having worked on all major projects from the Vikramaditya to the Talwar class frigates. Up to 40 people have been hired over the last year and 3,000 are targeted to be inducted over the next five, but the future will depend on orders.