Reliance forms aerospace and security solutions companies

Issue No. 15 | August 01-15, 2012

Reliance Industries Limited (RIL), India’s top ranking company’s quest for organic and non-organic growth continues in different sectors. The latest is its entry into the booming aerospace and defence industry, the plans of which are slowly unfolding.

Early July 2012, RIL applied for an industrial licence with the Department of Industrial Policy and Promotion (DIPP) to ‘design, develop, manufacture, equipment and components, including airframe, engine, radars, avionics and accessories for military and civilian aircraft, helicopters, unmanned airborne vehicles and aerostats.” RIL has created two new entities: Reliance Aerospace Technologies Pvt Ltd and Reliance Security Solutions Ltd.

Reliance Industries sees enormous potential in the defence and aerospace sector as the total offset opportunity is expected to surpass $12 billion over the next 10 years, driven by defence procurement plans. India’s defence budget in 2012-13 was over $42 billion. India is the world’s largest arms importer with plans to spend $100 billion on weapons over the next decade.

RAL to invest $1 billion

The new company is expected to invest close to $1 billion over the next few years in aerospace sector. RIL last year had roped in Dr Vivek Lall who was heading Boeing’s Defense, Space and Security unit in India, to give shape to RIL’s entry into aerospace and defence.

Dr Lall over the past few months has been busy cobbling up the venture, finalising the business plans and going on a talent-hiring spree both in India and overseas. Sources said the new aerospace unit will create about 1,500 jobs forthwith.

The company will also undertake research and produce new aerospace technologies, materials, components and equipment and test and carry out their certification.

The company will partner with global majors to bring in sophisticated civil and military aerospace technologies into the country. Earlier this year, RIL had entered into a memorandum of understanding (MoU) with Dassault Aviation for ‘pursuing strategic opportunities for collaboration in the area of complex manufacturing and support in India’. Dassault manufactures Rafale combat jets (which won the deal to provide Indian Air Force 126 Rafale fighter jets) and Falcon business jets.

According to media speculation, the hub could be in Nashik, Maharashtra. Creating a manufacturing hub is at the heart of Mukesh Ambani’s ambition in the aerospace business, an unnamed Mumbai consultant has been quoted in the media. “He seems to be focusing on aircraft parts in the short term and on developing new technologies in the long term,” the consultant said.

The defence market in India is largely dominated by offset contracts. The government has an offset clause in defence procurement contracts with foreign firms, which requires for the foreign company that gets a weapons deal over Rs. 300 crore has to plough back at least 30 per cent of the value into India.

Industry experts feel the RIL may emerge as the biggest Indian player in various defence projects like combat aircraft, military systems and homeland security in near future. Mukesh Ambani’s new ventures of defence, aerospace solutions and homeland security may overtake his existing businesses in years to come.

The rapid rise of Reliance Industries Limited as India’s most valuable company by market value is not surprising at all. From a largely petrochemicals giant, RIL has forayed into several sectors and now is ranked 99th in Fortune Global 500 companies. And now with RIL entering the defence and aerospace sector, the sky is the limit for Mukesh Ambani’s growth.