ThyssenKrupp India eyes defence, aerospace sectors in expansion bid

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ThyssenKrupp India eyes defence, aerospace sectors in expansion bid - Livemint

CEO Thiemann says his firm is open to Indian partners for projects, can leverage parent's engineering expertise

First Published: Fri, Jan 02 2015.
P.R. Sanjai | Swaraj Singh Dhanjal

Mumbai: ThyssenKrupp India Pvt. Ltd is looking to expand its business in the country in segments such as aerospace, defence and smart cities.

The local unit of the German industrial engineering conglomerate ThyssenKrupp AG will bid for multi-billion dollar aerospace and defence contracts and lend technology to its Indian partners to build submarines and smart cities, Michael Thiemann, chief executive officer of the Indian unit said in an interview last week. Thiemann said his company was open to tying up with private Indian companies such as Larsen and Toubro Ltd for projects.

ThyssenKrupp already makes mining equipment, cement plants and boilers in the country. "We will increase these capacities due to the demand in India. We are in alignment with the government's Make in India campaign," said Thiemann, referring to the campaign to boost domestic manufacturing.

ThyssenKrupp India will open a dedicated aerospace component facility in Bengaluru to supply components for Indian and international airlines for aircraft families including The Boeing Co. and Airbus SAS.

"We work like a project manager with the largest names in the aerospace industry. We are sitting in the production house and we make sure that each material is available when it is required. We are like the stockists of aerospace products," he said, adding that the facility will be operational by February.

The company is also looking to build warehouses for aviation and auto industries.

Thiemann said the Indian unit can leverage its parent's engineering expertise in plants, materials and mechanical aspects. ThyssenKrupp India is also keen to join a project to build submarines in India, which is estimated at Rs.50,000 crore.

"(Prime Minister Narendra) Modi was very clear that six submarines should be made coming from the supplier of the technology directly, and all six should be made in India. And we bring all the knowhow, maybe some very quick part delivery; we will supervise and guide as a company how these submarines will be built. We would want to build at least one of such submarines in India," he said.

On Tuesday, three state-run companies—Bharat Heavy Electricals Ltd (Bhel), Mishra Dhatu Nigam Ltd and Hindustan Shipyard Ltd—announced the formation of a consortium to build submarines in India. The consortium will approach the defence ministry to be considered as a prospective bidder for Indian Navy's P-75 (I) project to build six submarines at a local shipyard.

ThyssenKrupp India does not have a local shipyard, but Thiemann said he is open to tie-ups with companies such as Larsen and Toubro (L&T).

With the government taking several initiatives to speed up procurement, defence has emerged as a big opportunity for companies. According to a July report by Edelweiss Securities Ltd, defence spending over the next 10 years is expected to be around $248 billion. Since foreign winners of defence contracts must mandatorily invest 30% of their contract value in India in so-called offsets, the minimum opportunity for domestic companies is expected to be around $75 billion.

The government has scrapped licence requirement for manufacturing all but 16 defence items. In the last union budget, the government had increased the foreign direct investment limit in defence to 49% while also increasing capital expenditure budget by 20%, the report said.

"The new government has moved quickly in terms of granting clearance to various defence procurement orders and so far orders worth almost Rs.1.25 trillion have been approved," said a senior executive with a domestic brokerage, who did not wished to be named.

However, he added that foreign companies might find it difficult in finding the right domestic partners as there are very few companies in the private sector, which are involved in defence manufacturing.

"Orders in defence are non-linear; there is no guarantee that if you have an order today, you will have orders tomorrow and so, people haven't invested in creating huge capacities for defence manufacturing," he said.

ThyssenKrupp India has also expressed interest in collaborating on smart city projects and in the renewable energy segment by advanced technologies.

Thiemann, however, did not disclose capital expenditure for the proposed projects and added that funding is not a constraint once the company secures the opportunity to build a submarine or a smart city.