HAL is welcome to explore tie-up with Embraer

IBSA

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HAL is welcome to explore tie-up with Embraer: Brazilian ambassador Published May 17, 2020 | By admin SOURCE: RAUNAK KUNDE / NEWS BEAT / IDRW.ORG



Brazil’s ambassador to India Andre Aranha Correa do Lago in An interview with India’s Public Broadcaster Doordarshan has said that Indian state-owned aerospace and defense company Hindustan Aeronautics Limited (HAL) is welcome to explore a tie-up with Brazilian aerospace conglomerate Embraer Aerospace company after Boeing pulled out of a $4.2 billion deal to acquire the commercial plane division of its Brazilian rival Embraer.

Former Chairman and Managing Director of Hindustan Aeronautics Limited (HAL) Dr.R.K.Tyagi has written a letter to Hardeep Singh Puri who is Minister of Civil Aviation of India had advocated India buying at least 51% stake in the Brazilian aerospace conglomerate Embraer S.A., so that E-Jet E2 medium-range jet airliners and ERJ145 Regional Jet can be used to meet the requirements of the UDAN scheme where according to him there is a requirement for nearly 300 aircraft in next decade or so. Tyagi says these jets can be manufactured in phase manner in India and Government should considering buying the majority stake in the company before others especially China makes an offer.

Many Defence Analysts in India had supported using Embraer developed E190-E2 regional jet model to meet India’s defense requirements like that of AWACS, Mid-Air Refuellers, and Signal Intelligence (SIGINT).

idrw.org .Read more at India No 1 Defence News Website https://idrw.org/hal-is-welcome-to-...eYbJmmAu_0-FApfg-UxzIcYOflYl336RvEgkkpf1xTcug .
 

Shaitan

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Who is taking a bet on GoI (HAL) actually doing anything about this?
Have any of the government company's went out acquired foreign assets? Only examples I can think of are from the private sector.
 

arkos

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This deal only works if an order for civilian passengers planes is assured. Buying a majority stake in Embraer just for military purposes is plain waste of money. With covid decimating the aviation sector and still far away for things to return to normal I don't think orders for new civilian planes is coming anytime soon.
 

proud_indian

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Have any of the government company's went out acquired foreign assets? Only examples I can think of are from the private sector.
the one I can think of is EESL. It acquired UK's energy firm Edina in 2018.


EESL acquires U.K. energy firm Edina for ₹493 crore

SPECIAL CORRESPONDENT
UPDATED: MARCH 20, 2018 22:13 IST


Saurabh Kumar.


India’s state-run power services firm to help bring CHP tech

Energy Efficiency Services Limited (EESL) has acquired Edina, a supplier, installer and maintenance provider for combined heat and power (CHP), gas and diesel power generation solutions in the U.K. for £55 million (₹493 crore).

The acquisition, a first-of-its-kind by an entity under the Ministry of Power, was made through EESL’s U.K. subsidiary, EnergyPro Assets Limited (EPAL).


“Leveraging Edina’s unique bespoke approach with our business models for scaling energy efficiency solutions across international borders, we are confident in the potential of this partnership to scale trigeneration technology adoption and to transform CHP market in India,” said Saurabh Kumar, MD, EESL and chairman, EPAL.

“The acquisition is an important strategic step in our continued efforts towards facilitating India’s energy security and sustainable energy supply.”


£100 million revenue

Edina, with more than 30 years of experience, commands 27% of the gas engine market share and has revenue of £100 million, EESL said.
On the one hand, EESL aims to tap into U.K.’s £6 billion (₹53,782 crore) energy efficiency market, expanding the offering in the energy service contract model for CHP technology. On the other, EESL intends to bring CHP technology to India, providing an integrated service offering to industries that would enable them to receive equipment maintenance, electricity, heat and power at no upfront costs for technology installation, said a company statement.
EESL is implementing a global strategy and commitment to invest £150 million (₹1,343 crore) through EPAL into energy services business opportunities in the U.K., EU and North America between 2017 and 2019. EESL’s investment plan takes forward the commitment made by Prime Minister Narendra Modi of India and Prime Minister Theresa May of the U.K. for an enhanced ‘Energy for Growth’ Partnership between the two countries, the statement added.

 

Flying Dagger

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This deal only works if an order for civilian passengers planes is assured. Buying a majority stake in Embraer just for military purposes is plain waste of money. With covid decimating the aviation sector and still far away for things to return to normal I don't think orders for new civilian planes is coming anytime soon.
4.2 bn dollar was for 80percent stake and it's a small price to pay in long term infact we can definitely negotiate right now below 4 bn. Economy will boom in next couple years again and military requirements aren't going to be reduced either.

We can replace A320 neo too with these in civilian market. Then add transport aircraft Awacs tankers etc requirements of IAF IA and IN worth billions of dollars . The capability of this venture is a lot provided we buy stake there which is highly unlikely to happen.
 

AZTEC

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This is big. If India does eventually buy Embraer, our Air Force will never need to import medium transport aircraft. Embraer will bring us such capabilities that we may even one day build a C-17 equivalent. Here’s Embraer’s latest medium transport aircraft:

Govt of India exploring options to buy Embraer's commercial aircraft biz

The Indian government is keen to buy Embraer’s commercial aircraft division, said a top ranking government official, reports Subhomoy Bhattacharjee in Business Standard. “We are very interested. We are exploring alternatives,” the official said, confirming a development reported earlier by Reuters on Brazil’s plans to reach out to India and China as possible new partners.

One of the arrangements the government is considering is a tie-up with a sovereign fund to finance the deal. This is the first time the Indian government has expressed clear willingness to enter the deal. The official said India’s interest has been conveyed to the Brazilian government.

While Embraer is a listed company with diversified shareholding, the Brazilian government holds veto rights over the company through a golden share. The company, which ranks after Airbus and Boeing in the commercial aircraft market globally, has lost value rapidly, especially in the wake of the Covid-19 pandemic, and has reported a loss of USD 315 million for the April-June quarter.

“The Brazilian government would be naturally supportive of any contribution of Embraer to India’s growth story and the strengthening of bilateral relations,” said a Brazil embassy spokesperson, without divulging details. For India, getting the plant will sit well with the government’s ambition to develop the economy’s credentials as a manufacturing entity. It has been keen to get marquee names into the domestic manufacturing circuit.

“There are risks in considering the deal. But where else will we get a similar company?” asked the official quoted earlier. The subject has been debated within the top decision-making levels in the government and a decision is expected soon. That Brazil has also floated the Embraer bid to China has added a further note of urgency to the discussions. The key aspect to a possible deal is, therefore, setting up operations in India by the Brazilian company. This is not clear as yet, but it is of vital importance for the government to secure, the official said.

While Embraer did not respond to queries from Business Standard, the embassy spokesperson said the two countries have been happy to renew their strategic partnership. “India is set to be the largest market for aviation in the coming years — despite the impact of the pandemic. From what we hear, Indian clients always stress on high quality and advantages of Embraer’s aircraft.” The government has meanwhile begun to explore the financial costs of the deal and has held preliminary talks with entities within India and abroad to finance the buyout. One of the options is to jointly finance the deal through a sovereign wealth fund.

The valuation of the company that has straddled the mid-sized aircraft market has dipped from even the USD 4.2-billion at which Boeing was slated to pick 80 per cent stake in it when the talks were called off in April this year. It also included a 49 per cent stake in the C-390 Millennium military transport jet programme of Embraer.

The government does not have a template to undertake a deal of such scale. All acquisitions abroad of oil and gas assets have been made by government- owned companies. These firms have had access to the government purse, largely as guarantees to raise loans abroad to buy the assets. Of the two civil aviation entities, Air India is sick and in no position to raise any money from within the country or abroad; the other aircraft manufacturer, Hindustan Aeronautics (HAL) has too feeble a balance sheet (INR 1,989 crore revenue in 2018- 19) to make a bid. The Reuters report had quoted R K Tyagi, ex-chairman of HAL, that he has written to the government, urging it to move fast. It is consequently a new territory for the Indian government to traverse.
 

Bhumihar

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This is big. If India does eventually buy Embraer, our Air Force will never need to import medium transport aircraft. Embraer will bring us such capabilities that we may even one day build a C-17 equivalent. Here’s Embraer’s latest medium transport aircraft:

Govt of India exploring options to buy Embraer's commercial aircraft biz

The Indian government is keen to buy Embraer’s commercial aircraft division, said a top ranking government official, reports Subhomoy Bhattacharjee in Business Standard. “We are very interested. We are exploring alternatives,” the official said, confirming a development reported earlier by Reuters on Brazil’s plans to reach out to India and China as possible new partners.

One of the arrangements the government is considering is a tie-up with a sovereign fund to finance the deal. This is the first time the Indian government has expressed clear willingness to enter the deal. The official said India’s interest has been conveyed to the Brazilian government.

While Embraer is a listed company with diversified shareholding, the Brazilian government holds veto rights over the company through a golden share. The company, which ranks after Airbus and Boeing in the commercial aircraft market globally, has lost value rapidly, especially in the wake of the Covid-19 pandemic, and has reported a loss of USD 315 million for the April-June quarter.

“The Brazilian government would be naturally supportive of any contribution of Embraer to India’s growth story and the strengthening of bilateral relations,” said a Brazil embassy spokesperson, without divulging details. For India, getting the plant will sit well with the government’s ambition to develop the economy’s credentials as a manufacturing entity. It has been keen to get marquee names into the domestic manufacturing circuit.

“There are risks in considering the deal. But where else will we get a similar company?” asked the official quoted earlier. The subject has been debated within the top decision-making levels in the government and a decision is expected soon. That Brazil has also floated the Embraer bid to China has added a further note of urgency to the discussions. The key aspect to a possible deal is, therefore, setting up operations in India by the Brazilian company. This is not clear as yet, but it is of vital importance for the government to secure, the official said.

While Embraer did not respond to queries from Business Standard, the embassy spokesperson said the two countries have been happy to renew their strategic partnership. “India is set to be the largest market for aviation in the coming years — despite the impact of the pandemic. From what we hear, Indian clients always stress on high quality and advantages of Embraer’s aircraft.” The government has meanwhile begun to explore the financial costs of the deal and has held preliminary talks with entities within India and abroad to finance the buyout. One of the options is to jointly finance the deal through a sovereign wealth fund.

The valuation of the company that has straddled the mid-sized aircraft market has dipped from even the USD 4.2-billion at which Boeing was slated to pick 80 per cent stake in it when the talks were called off in April this year. It also included a 49 per cent stake in the C-390 Millennium military transport jet programme of Embraer.

The government does not have a template to undertake a deal of such scale. All acquisitions abroad of oil and gas assets have been made by government- owned companies. These firms have had access to the government purse, largely as guarantees to raise loans abroad to buy the assets. Of the two civil aviation entities, Air India is sick and in no position to raise any money from within the country or abroad; the other aircraft manufacturer, Hindustan Aeronautics (HAL) has too feeble a balance sheet (INR 1,989 crore revenue in 2018- 19) to make a bid. The Reuters report had quoted R K Tyagi, ex-chairman of HAL, that he has written to the government, urging it to move fast. It is consequently a new territory for the Indian government to traverse.
This is like so foriegn company buying HAL, they will not sell strategic asset.
 

AZTEC

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This is like so foriegn company buying HAL, they will not sell strategic asset.
They may sell it. After all, it was Brazil’s government who invited the bids from China and India.
Please read this for more information:
 

Rajaraja Chola

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This is like so foriegn company buying HAL, they will not sell strategic asset.

They are the ones selling in the first place. Embraer and Hal aren't even comparable. Hal is bigger in manufacturing than them and has large orders thanks to our threat perception. Brazil has none.
 

Dessert Storm

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The $ involved in the buy-out is no known. For $4.2 Billion, Boing was supposed to get 80% stake in Embraer Commercial + 49% stake in C390 Millennium Military Transport Jet Program. Boing has backed out now.

The valuations would go down substantially after Covid 19. The GOI would probably want to pick stake in the MTA program too.

The problem would be once bought, who'll run it. Hope it's a PPP at worst, otherwise it's a dead investment.
* There are talks that GOI would buy it from its Sovereign Funds, if the deal goes through.
 
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Rajaraja Chola

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The $ involved in the buy-out is no known. For $4.2 Billion, Boing was supposed to get 80% stake in Embraer Commercial + 49% stake in C390 Millennium Military Transport Jet Program. Boing has backed out now.

The valuations would go down substantially after Covid 19. The GOI would probably want to pick stake in the MTA program too.

The problem would be once bought, who'll run it. Hope it's a PPP at worst, otherwise it's a dead investment.
* There are talks that GOI would buy it from its Sovereign Funds, if the deal goes through.
Hope it's going to be PPP. It would be an nice entry into aerospace for Tata's, Mahindra's and especially Adani who is trying this and that. Govt should own 49% of the new venture atleast. 20 with Brazil and its existing investors and remaining with Indian private companies. And give it strategic status meaning it can't be sold to foreign private entities. And make sure all udan order aircrafts needs to be manufactured in India and see how manufacturing takes off in India.
 

AZTEC

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Folks should realise that only Commercial Division of Embraer is up for sale not Defence Division.
So, no automatic KC-390 for us.
I got so excited that I forgot about this.

Nevertheless, what we will get from the commercial division alone is huge. I can’t exaggerate it.

The difference between commercial and military transport aircraft is the same as the difference between space rockets and ballistic missiles; it’s not big. We will probably be able to build medium military transport ourselves if we can get our hands on E195 tech.

(Embraer E195)
Still, the implications of the Embraer purchase, if it happens, are huge for India’s commercial aviation industry too.

And don’t forget, Indian Navy’s P-8I is a modified version of a commercial Boeing aircraft, which exemplifies how we can modify the E195 for sub-hunting and AEWACS roles.

One more relevant example would be IAF’s Netra AEWACS, which is a modified civilian Embraer aircraft:
 
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