ST Engineering unit may be back in business in India as graft ban ease

[AVERAGE INDIAN]

A DECISION by Indian anti-graft officials to relax curbs on six foreign firms accused of corruption could give a unit of Singapore Technologies Engineering another crack at the huge market.

ST Engineering's land systems division unit, ST Kinetics, and five other companies had allegedly been involved in bribery and banned from doing business with the Indian Defence Ministry.

But that 2012 ruling has reportedly been eased as Air Marshal R.K. Sharma, the vice-chief of the Indian Air Force, was quoted by Bloomberg as saying that some purchases from the six foreign firms are now permitted.

The other five companies are Rolls-Royce Holdings, Finmeccanica, Israel Military Industries, The Corporation Zashchita and Rheinmetall Air Defence.

"Decisions will be on a case- to-case basis. All such firms are under examination," Air Marshal Sharma told Bloomberg earlier this month.

The about-turn comes amid political changes in India, with the new government indicating that it is determined to modernise its defence force, including allowing higher foreign investment.

Indian Prime Minister Narendra Modi is reported to be targeting the signing of a contract for 126 French-made Rafale fighter jets by the end of the year in an attempt to protect disputed borders with neighbours Pakistan and China.

The previous Congress-led government had cracked the whip against firms caught up in corruption allegations.

ST Kinetics was one of six firms implicated in a 2009 scandal involving the alleged bribery of a top defence production official.

The firm was blacklisted by India's Defence Ministry in 2012, which meant it was barred from doing business with the ministry for the next 10 years.

ST Kinetics has always rejected the allegations and has filed a petition in the High Court of Delhi to "vigorously take appropriate action to clear its name and defend its reputation".

A spokesman for ST Kinetics said yesterday that the petition seeks to quash the debarment order, among other things.

"We are not in a position to comment further on the proceedings as the matter is ongoing in the Delhi High Court," he added.

The spokesman did not address the latest apparent turn of events but noted: "We have ceased all defence business activities in India. However, we continue to pursue our commercial business in India, which is not affected by this debarment."

DBS analyst Suvro Sarkar said the new Indian government has been seen to be more investor-friendly and any lifting of the ban would bode well for ST Kinetics and ST Engineering in the long run.

"India is a very important defence market but there haven't been many deals for Singapore companies, with European firms winning most of the fighter aircraft and guns contracts," added Mr Sarkar.

He also said that ST Kinetics can again bid for the howitzer - a type of artillery weapon - contract, for which it was in the running previously.

OCBC Investment Research analyst Carey Wong said: "Having a bigger, exportable market is positive for ST Kinetics, it just depends on whether it can win contracts against other manufacturers."

ST Engineering shares closed three cents down at $3.62 yesterday, in line with a slide in the broader market.

- See more at: ST Engineering unit may be back in business in India as graft ban eases, News, News, AsiaOne Business News