Mahindra & Mahindra eyes defence deal with British Aerospace

CHENNAI: As part of its push into the defence sector, the $17 billion SUV-to-software conglomerate Mahindra & Mahindra is in talks with British Aerospace for an alliance. Although the talks are on, "nothing has been concluded" yet, said two people with direct knowledge of the matter. M&M earlier had an alliance with British Aerospace but bought out its partner's 26% stake in their joint venture Defence Land Systems India (DLSI) in 2013.

Sources also say Mahindra is "not bidding" for a stake in Pipavav Defence & Offshore Engineering Co Ltd. There has been a buzz about Mahindra being one of the three entities interested in a stake in the company alongside the Hero Group, as well as French shipbuilder DCNS. When contacted, a Mahindra spokesperson said, "All of this is speculation and we will not comment on it."

Sources say defence is now among the top priority sectors for Group Mahindra with alliance/acquisition energy focused on it. Mahindra's last major acquisition was when it bought out 51% stake in Peugeot Motocycles for 28 million euro. Its other European acquisition - Swedish auto major Saab - is stuck in first gear. "The group is still waiting for the other side to revert on Saab and so for now it's not on the front-burner," said a source.

Mahindra's first alliance with BAE was announced in 2010 with the Indian company holding 74% stake and BAE the rest in the JV DLSI. DLSI had plans to produce anti-mine vehicles for the Indian armed forces and supplying artillery howitzers in the future. However, three years later, the two partners parted ways with Mahindra's 100% subsidiary Mahindra Defence Systems acquiring BAE Systems'26% shareholding in DLSI.

Mahindra officials said at that time that the decision was a strategic one to enable both companies approach opportunities individually.

However, even then, BAE had said in a statement that "building domestic capabilities in partnership with Indian companies will remain a cornerstone of our strategy in India. We look forward to opportunities to collaborate with Mahindra and others to enhance the role of the private sector in the defence industry."