The first JV is between Mahindra & Mahindra and government of Israel-owned Rafael Advanced Defense Systems and another one is with US-based Telephonics Corporation.
In the wake of bribery allegations, Mahindra & Mahindra Vice Chairman and Managing Director Anand Mahindra said the government needs to revamp and bring in transparency in defence procurements.
Anand Mahindra in an interview with ET Now, spoke about the joint venture with 'Rafael' and how he is looking forward to opening up of foreign investment in defence. Excerpts:-
ET Now: What kind of JV is this with Rafael and how will it benefit you?
Anand Mahindra: The Rafael JV is with a sizable Israeli company, roughly about $2 billion. What we are excited about is that it is about hi-tech systems. When people think of defence, they think of guns, levy trucks. Increasingly though, the most important element of defence expenditure is going to be in systems. What makes this hardware intelligent, how hi-tech are our systems? That is going to make the difference between victory or loss in battles of the future.
That is where India needs to make investments. This JV is towards that objective. Rafael brings in very advance systems of surveillance, response. We are going to bring Rafael technology to bear on the FICV bid. If we are fortunate enough to be chosen for that procurement, then Rafael will provide the weaponry, response mechanisms on that system. It is a beginning of something which is going to be much larger.
ET Now: What kind of investments are going to be put into it? What kind of revenue contribution will it give you in the next 5 and 10 years?
Anand Mahindra: We are beginning with a Rs 100 crore investment which will be in the ratio of the equity ownership, which under current regulations is 74:26. As we go long we are looking at a business of roughly half a billion dollars over 10 years which works out to about $50 million a year. However, if we do win in the FICV bid then this revenue could climb to a billion dollars over the next 10 years.
ET Now: What kind of change do you want in defence procurements?
Anand Mahindra: Transparency. The system's know how, the processes, the very transparent processes that exist in the best private sector companies for any kind of procurement process. What people want to know is 'why (are) we buying something', 'what is its cost', 'what exactly was its competition', 'what are its technological features', 'why was it chosen'.
I believe there is no harm in enunciating and being transparent about that, which is what we will do in all our ventures for defence production. This is the real time for the government to make good its promise of involving the private sector to a much greater degree in defence procurement. If they do, then what you will immediately get is transparency and technology which is a hallmark of the joint ventures that we announced today.
In the wake of bribery allegations, Mahindra & Mahindra Vice Chairman and Managing Director Anand Mahindra said the government needs to revamp and bring in transparency in defence procurements.
Anand Mahindra in an interview with ET Now, spoke about the joint venture with 'Rafael' and how he is looking forward to opening up of foreign investment in defence. Excerpts:-
ET Now: What kind of JV is this with Rafael and how will it benefit you?
Anand Mahindra: The Rafael JV is with a sizable Israeli company, roughly about $2 billion. What we are excited about is that it is about hi-tech systems. When people think of defence, they think of guns, levy trucks. Increasingly though, the most important element of defence expenditure is going to be in systems. What makes this hardware intelligent, how hi-tech are our systems? That is going to make the difference between victory or loss in battles of the future.
That is where India needs to make investments. This JV is towards that objective. Rafael brings in very advance systems of surveillance, response. We are going to bring Rafael technology to bear on the FICV bid. If we are fortunate enough to be chosen for that procurement, then Rafael will provide the weaponry, response mechanisms on that system. It is a beginning of something which is going to be much larger.
ET Now: What kind of investments are going to be put into it? What kind of revenue contribution will it give you in the next 5 and 10 years?
Anand Mahindra: We are beginning with a Rs 100 crore investment which will be in the ratio of the equity ownership, which under current regulations is 74:26. As we go long we are looking at a business of roughly half a billion dollars over 10 years which works out to about $50 million a year. However, if we do win in the FICV bid then this revenue could climb to a billion dollars over the next 10 years.
ET Now: What kind of change do you want in defence procurements?
Anand Mahindra: Transparency. The system's know how, the processes, the very transparent processes that exist in the best private sector companies for any kind of procurement process. What people want to know is 'why (are) we buying something', 'what is its cost', 'what exactly was its competition', 'what are its technological features', 'why was it chosen'.
I believe there is no harm in enunciating and being transparent about that, which is what we will do in all our ventures for defence production. This is the real time for the government to make good its promise of involving the private sector to a much greater degree in defence procurement. If they do, then what you will immediately get is transparency and technology which is a hallmark of the joint ventures that we announced today.
ET Now: Can middleman be allowed in India?
Anand Mahindra: I do not want to comment on those because those are not important (sic), whatever the value chains that you have, the word middleman is a bad word. In many areas the polite word is intermediaries.
If there is value in intermediation terrific that is fine. To me that is not the point, the point is transparency. Not whether you have an intermediary or not. The question is how transparent are we about our processes.
ET Now: You said that as an Indian it worries you about certain reports that 90% of the Indian air force equipment is obsolete.
Anand Mahindra: Somebody asked me if I was worried about that particular report. I did not want to comment on that report because I have no knowledge about that report. I am not privy to that. Am I worried about whether we are adequately prepared? Yes of course. Our systems and hardware need to be upgraded dramatically. We have fallen behind on many schedules in all the armed forces. As an Indian, I am worried.
ET Now: You have always batted for more than 26% FDI in defence, it is not happening now do you still demand more?
Anand Mahindra: We batted right from the beginning of our JV with BAE. We batted very strongly that 49% was certainly valid and justified and we continue to bat and we continue to hope.
ET Now: It was public that you were bidding for SAP, are you still in the race?
Anand Mahindra: I do not think anything was public and our stand has always been the very cliched comment that we do not comment on speculation.
ET Now: You opted out of Air India at a very right time. What do have to say about Air India?
Anand Mahindra: I opted out because we have very big plans in aerospace. I felt it is a conflict of interest. It would be improper for me to comment because the board is working on transaction and given that I was privy to information while I was there, it would be highly inappropriate for me to comment.
Anand Mahindra: I do not want to comment on those because those are not important (sic), whatever the value chains that you have, the word middleman is a bad word. In many areas the polite word is intermediaries.
If there is value in intermediation terrific that is fine. To me that is not the point, the point is transparency. Not whether you have an intermediary or not. The question is how transparent are we about our processes.
ET Now: You said that as an Indian it worries you about certain reports that 90% of the Indian air force equipment is obsolete.
Anand Mahindra: Somebody asked me if I was worried about that particular report. I did not want to comment on that report because I have no knowledge about that report. I am not privy to that. Am I worried about whether we are adequately prepared? Yes of course. Our systems and hardware need to be upgraded dramatically. We have fallen behind on many schedules in all the armed forces. As an Indian, I am worried.
ET Now: You have always batted for more than 26% FDI in defence, it is not happening now do you still demand more?
Anand Mahindra: We batted right from the beginning of our JV with BAE. We batted very strongly that 49% was certainly valid and justified and we continue to bat and we continue to hope.
ET Now: It was public that you were bidding for SAP, are you still in the race?
Anand Mahindra: I do not think anything was public and our stand has always been the very cliched comment that we do not comment on speculation.
ET Now: You opted out of Air India at a very right time. What do have to say about Air India?
Anand Mahindra: I opted out because we have very big plans in aerospace. I felt it is a conflict of interest. It would be improper for me to comment because the board is working on transaction and given that I was privy to information while I was there, it would be highly inappropriate for me to comment.
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