India Rejects JV by Larsen & Toubro, EADS

[bhramos]

India Rejects JV by Larsen & Toubro, EADS

NEW DELHI - India has rejected a proposed tie-up between its biggest defense contractor, Larsen & Toubro, and Franco-German aerospace and defense group EADS, according to a Dec. 3 report.

The Financial Times said EADS and L&T had planned to form a joint venture to supply electronic warfare systems, avionics and radars, but it was rejected because it would exceed caps on foreign investment.

The companies had announced the joint venture May 5.

The upper limit allowed by the Foreign Investment Promotion Board (FIPB) for foreign direct investment in companies in the defense sector is 26 percent.

Amit Mitra, the secretary general of the Federation of Indian Chambers of Commerce and Industry, argued that the limits on foreign ownership should be raised.

"[The defense sector] could be the next sector of massive growth, but foreign participation is necessary," Mitra told the newspaper.

India has a five-year military procurement budget of $30 billion, which is an all-time high, as the government overhauls the country's hardware.

BAE Systems also had to redraw plans for a joint venture to supply armored vehicles in partnership with Indian carmaker Mahindra & Mahindra. It had initially sought a 49 percent stake in the joint venture.

The FIPB this week approved a revised split of 26 percent for BAE and 74 percent for Mahindra, the FT said.

India Rejects JV by Larsen & Toubro, EADS - Defense News

 

[sob]

This is not good news. Our spending on R&D in defence is almost 98% by DRDO and we have seen the results. The bang for bucks ratio is very dismail.

Such JVs ensure that our people are exposed to top technologies available to the Western countries. Once they get this experience they can go ahead and develop better solutions.

Such FDI norms in this critical industry should be dealt by in a case to case basis. Electrnoic warfare is going to take center stage and we cannot ignore this and sacrifice it at the altar of some stupid FDI limit.

 

[Quickgun Murugan]

Are they afraid that secret super-duper classified latest indigenous technology from DRDO(via L&T) will get leaked to EADS hands?

 

[Rage]

The real question is: why?

I don't believe the official line: "because it would exceed caps on foreign investment."

If they wanted it, they would have got it. The norm has been to loosen restrictions on foreign investment anyway, in order to liberalize what is an absurd and captive market.

My information from sources is very different: the FIPB [Foreign Investment Promotion Board] had apparently found discrepancies in the nature of investment in the venture: in particular, with the routing of the equity and foreign direct investment. Although total FDI incoming directly into the venture was below 26 per cent, in a ratio that saw the proposed joint venture hold 24.5 % by EADS, 51 % by L&T Technologies and 24.5 % by L&T, the remaining equity was also being routed through the services joint venture wherein the foreign collaborator had a 49 % stake. So although L&T claims that the proposed venture will be a different firm in which L&T, as a group, will have a 51 % stake, there was a need to verify that the control and ownership of the two joint venture’s will remain with L&T, in other words, the EADS [or more likely both companies in collusion] were deliberately circumventing FDI norms by rerouting foreign directing investment in question that would have seen the EADS able to wrestle control over exposure to design, development and manufacturing technologies and blueprints [particularly with respect to the international market] by exploiting legal and technical loopholes.

 

[rajkoumar]

rejecting the contractor for a joint venture is a mistake L&t and EADS are technologicaly forward than DRDO surely their invention is uncomparable with invention of DRDO. if we accpet them it may accelarate our capapbility to face the future we could have capability of access to technolagies that we are in lack. we coul have the capability of producing our self and and can also sell them to our ally nations. we should be open to wellcome all access to technolagie transfer methods.

 

[Quickgun Murugan]

rejecting the contractor for a joint venture is a mistake L&t and EADS are technologicaly forward than DRDO surely their invention is uncomparable with invention of DRDO. if we accpet them it may accelarate our capapbility to face the future we could have capability of access to technolagies that we are in lack. we coul have the capability of producing our self and and can also sell them to our ally nations. we should be open to wellcome all access to technolagie transfer methods.

DRDO just doesn't want competition. The moment, L&T or any private firm starts replacing DRDO as India's premiere defence research organization, is the day DRDO's inefficiency will be officially recognized.

 

[ppgj]

FIPB rejects EADS joint venture with L&T

02 Dec 2009 8ak: FIPB has rejected European giant EADS' proposed joint venture with L&T. EcoTimes article had said in August that the JV was facing hurdles. EADS was seeking 49% stake in the JV and the FIPB can use discretion in approving FDI of over 26% on a case by case basis. Our sources suggest that one of the reason was that EADS was not offering any ground breaking technologies of strategic interest to India; rather only basic equipment that it would have to manufacture irrespective given its offset liabilities now and in the future.

8ak feels that any global defence business wanting to set up in India should be encouraged. Other sources have indicated that the FDI cap is about to be lifted anyway, so rejecting major defence manufacturers does not reflect well on India especially when they can just as easily move to China or other countries, as in the GE+AVIC JV we have covered last week.

8ak - Indian Defence News: FIPB rejects EADS joint venture with L&T