France's DCNS to acquire 15% stake in Pipavav Defence for Rs 1,350 cro

Discussion in 'Indian Navy' started by SpArK, Dec 15, 2012.

  1. SpArK

    SpArK SORCERER Senior Member

    Oct 24, 2010
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    France's DCNS to acquire 15% stake in Pipavav Defence for Rs 1,350 crore


    MUMBAI: French warship maker DCNS will buy close to 15% stake in Nikhil Gandhi-promoted shipbuilder Pipavav Defence & Offshore Engineering for about Rs 1,350 crore, according to people close to the development.

    "DCNS will invest a little more than Rs 1,350 crore to acquire a significant minority stake in Pipavav Defence," one of the persons said. "They had earlier signed a strategic alliance with Pipavav, but have now decided to be a strategic investor. The stake sale will be completed over the next few days." A formal announcement is likely soon.

    DCNS, owned by the French government, specialises in building surface combatants, submarines, systems and equipment. The company reported revenues of $3.3 billion last year.

    "DCNS recently received in-principle nod from the French government to invest in Pipavav. The deal will be closed by next week," another person involved in the deal said. Pipavav's top executives were not available for comment.

    The deal would value the shares of Pipavav at a premium of 30% to their Friday closing price of Rs 92.95 on the Bombay Stock Exchange, where it ended down 3.28%. The French company's interest in Pipavav is a sign of the growing interest among foreign players to invest in India's defence sector. Japanese conglomerate Mitsubishi has expressed interest in acquiring stake in LarsenBSE 0.78 % and Toubro's shipbuilding subsidiary.

    In May, Pipavav had sought shareholders' approval to raise up to $200 million (about Rs 1,100 crore) to finance its growth plans for the defence sector.

    Earlier this month, the company had formed a joint venture with Mazagon Dock, the country's biggest naval shipyard. Interestingly, Mazagon Dock had said in February that it was manufacturing six SSK Scorpene submarines (P75) under transfer of technology from DCNS.

    According to people in the know, DCNS plans to increase its stake in the Indian firm to 26% by next year and bring in three of its executives on the company board once necessary approvals are in place.

    Last month, Pipavav had announced a deal with Saab, under which the Sweden-based defence and security company would invest Rs 201 crore for a 3.5% stake.

    Public-private partnership in the defence sector was opened last year, and Mazagon Dock was the first off the block. Three others - Cochin Shipyard, Hindustan Shipyard and Garden Reach Shipbuilders - are expected to follow suit.

    Pipavav's deal with Mazagon Dock, notified by the defence ministry recently, will help Pipavav execute at least some of Mazagon's order book, which runs into at least Rs 1 lakh crore. Following the notification, insurance company LIC recently increased its stake in Pipavav to 8.74%.

    Indian shipyards contribute only 0.1% to the global shipbuilding industry. In contrast, shipyards in China, Japan and South Korea produce more than 75% of the vessels manufactured globally, forcing Indian shipyards to look for orders from the domestic defence sector.

    India has about 150 warships in service with its navy and another 75 warships in Coast Guard.

    France's DCNS to acquire 15% stake in Pipavav Defence for Rs 1,350 crore - The Economic Times
    Snuggy321 likes this.
  3. Yusuf

    Yusuf GUARDIAN Administrator

    Mar 24, 2009
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    Re: France's DCNS to acquire 15% stake in Pipavav Defence for Rs 1,350

    Great news And may be not so great news.

    Great news if this leads to greater technology sharing. To innovating new products. To expand Indian ship building industry.

    Not so great if the govt becomes suspicious and doesn't give orders (doubt that though)
    Another thing is, will this count towards the offsets? What if DCNS wins next submarine contract. How will the offsets work if it has a stake in Indian company?
  4. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

    Dec 17, 2009
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    Re: France's DCNS to acquire 15% stake in Pipavav Defence for Rs 1,350

    We bought it because we know we are the winners of P75I. DCN only gets involved if they are making their products.
  5. Patriot

    Patriot Senior Member Senior Member

    Apr 11, 2010
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    Ahmedabad, Gujarat, India
    Re: France's DCNS to acquire 15% stake in Pipavav Defence for Rs 1,350

    IMO MOD is quiet defensive when it comes to offset, we do not see any investment in critical technology area. This should compensate & suffice the offset clause, as the offset clause is paper tiger thing only. On the other hand this move shall speed up the induction of weapon platforms.
  6. bengalraider

    bengalraider DFI Technocrat Stars and Ambassadors

    Oct 10, 2009
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    in a fast food joint next to the imperial shipyard
    Re: France's DCNS to acquire 15% stake in Pipavav Defence for Rs 1,350

    DCNS is simply putting it's money where it sees the greatest potential for growth, with the decline of defense spending in Europe and the massive planned augmentation of the IN planned and approved, DCNS is simply trying to be the company with all the answers once the Contracts are out

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