L&T said it was targeting Rs 10,000 crore in annual business from the defence segment by 2021.
It will hold 51 per cent of the equity in L&T MBDA Missile System Ltd, a company to be incorporated later this year. The JV would focus on orders under the Buy Indigenously Designed, Developed and Manufactured (IDDM) category, Buy Indian and Buy & Make Indian categories of defence procurement.
According to A M Naik, group executive chairman of L&T, the JV would be able to manufacture its first product in two years, though he did not give the investment size. Around 500 people are likely to be employed by the new company.
The government had decided not to import any missile system, creating business opportunities for domestic companies.
The Defence Procurement Procedure (DPP) issued in March 2016 set the ground for a new procurement regime, with emphasis on the ‘Make in India’ initiative in the sector.
The €2.9-billion MBDA (the world’s biggest exporter of missile systems) is jointly owned by the Airbus group, BAE Systems and Leonardo. The first two have 37.5 per cent each and Leonardo owns 25 per cent. MBDA has been present in India for about 60 years. It and L&T have been in a partnership for about six years, on the offset programme in the sector.
To begin with, the JV would aim to develop and supply fifth-generation anti-tank guided missiles, missiles for coastal batteries and high-speed target drones.
According to the two companies, the decision to formalise the partnership was after extensive evaluation and identifying of synergy. They've partnered on co-development and production of major sub-systems involving complex technologies and sophisticated weapon systems, such as MICA missile launchers and airframe segments.
Jayant D Patil, head of defence and aerospace at L&T Heavy Engineering, says the JV will not be looking at exports.
L&T has hitherto been involved in manufacturing of a range of launch systems, fire control systems and airframes/sub-systems for indigenous weapon programmes like missiles, rockets and torpedoes. This was done as a development partner and production agency for the government's Defence Research and Development Organisation and the defence ministry’s public sector undertakings.
Patil said a location for the venture had not been finalised. “We are looking at two locations. It is under consideration that two of our existing factories could be used, with the possibility of a new factory. It is all subject to volumes.” L&T has nine defence manufacturing units.
Naik said L&T would be targeting Rs 10,000 crore in annual business from the defence sector by 2021. The company has seen its export volumes in the segment rising to Rs 1,500 crore from Rs 100-150 crore. He said they would also be bidding for the Future Infantry Combat Vehicle programme of the army.