Anil Ambani led Reliance Group, Hinduja in talks for defence foray

Eager to participate in the government's strategic partnership policy and compete with other private sector players for bagging defence production orders worth billions of dollars over the next year, the Anil Ambani led Reliance Group and the Hinduja Group are looking to join forces and forge a mega partnership in the sector, multiple sources familiar with ongoing negotiations told ET NOW on the condition of anonymity.

ET NOW was the first to report the development.

"The Reliance Group and the Hinduja's are in advanced talks for a mega defence alliance which will be spearheaded by Reliance Naval & Engineering ( formerly called Reliance Defence) & Ashok Leyland. The top management of both companies have held detailed discussions for the same and the focus of this alliance is likely to be on the armoured vehicles platform," said one of the two sources cited above.


"Since the discussions between Reliance Naval & Engineering and Ashok Leyland are at an advanced stage, an official MoU may be announced by both the companies in Jan 2018. Reliance Naval & Engineering is looking to leverage Ashok Leyland's commercial vehicle manufacturing process and the Chennai facility to enter the lucrative armoured vehicles segment. Ashok Leyland is looking to expand speedily and grow the defence business to around Rs 5,000 crores a year so both stand to benefit from the proposed alliance," said a second source familiar with the discussions.

"Post the proposed defence alliance, both companies will look at partnering with a foreign original equipment manufacturer ( OEM)," said a third source on the condition of anonymity.

Commenting on the report, Ashok Leyland said: "While we can't comment on specific projects, we are working on multiple initiatives in defence including the armoured vehicle project."

Reliance Naval and Engineering however has not yet responded to our queries.

The Modi regime wants to shed its tag of the world's largest arms importer and in May 2017 released the strategic partnership policy , under which select domestic private sector companies will partner with foreign original equipment manufacturers ( OEMs) to jointly manufacture fighter jets, helicopters, submarines and armoured vehicles under the "Make In India" framework.

In March 2017, Reliance Group chairman Anil Ambani had said defence would emerge as the largest business for the group. In a presentation to analysts, he said , "There is a huge ooportunity for private sector in the defence business as currently India imports 70% of its defence requirement in value terms and accounts for 14% of the global defence imports in 2016. Overall, India offset opportunities are in excess of Rs 77,000 crore with peak obligation of Rs 10,000 crore in 2018. This is a big playing field for Indian private sector. "

In Ashok Leyland's 2017 annual report, in a message to shareholders, Chairman Dheeraj G Hinduja said that " the defence business will be an area of great focus in tactical, armoured and tracked vehicles" and that Ashok Leyland "continues to do well in the defence segment and has won 19 new tenders in the last 12-18 months".

Ashok Leyland has "embarked on a focused expansion plan to increase participation in the defence sector in India and abroad, with a focus on "Mobilty on Land" by developing varied platforms and defence applications", the annual report said.

"The policy on strategic partnership aims to encourage and increase domestic sector participation in the defence sector; for now, in fighter aircraft, helicopters, armoured fighting vehicles and submarines. This will harbour interest from Indian companies planning to foray into the defence sector by tying up with OEM's, with ownership and control continuing to be with Indian citizens. The MoD will consider the credential and capability of the applicant companies in a particular sector during the process of shortlisting," says Vaishali Sharma, Partner, Agram Legal Consultants.

Larsen & Toubro, the Mahindra Group, Tata Group and the Adani Group are other conglomerates expected to compete aggressively under the government's strategic partnership model even as overseas players like Lockheed Martin, Boeing, BAE systems Airbus and SAAB look to grab a share of the Indian defence pie.