Space companies shoot for the moon as govt eases FDI rules

Space sector startups involved in satellite manufacturing, launch vehicle operations and component manufacturing are set to gain from the latest amendments to the foreign direct investment (FDI) rules for India’s space sector as they will help them tap global pools of capital to expand local manufacturing and production capacity, firms and experts told ET.

Pranav Roach, president, Hughes Network Systems India Ltd, expects the latest FDI announcements to accelerate momentum in the satellite sector, especially in attracting more players and services.

He, though, said that “allowing 100% automatic FDI in the space sector would have further augmented the ecosystem and made the Indian space sector an even more attractive destination for foreign investments”.

Awais Ahmed, chief executive, Pixxel, told ET that permitting up to 49% FDI for launch vehicles reflects balancing foreign investment with national security and technological sovereignty.

The 49% cap for launch vehicles reflects a cautious yet optimistic opening of the sector, he said.

Given the strategic importance of launch capabilities and the rapidly growing global demand for launch services, this cap ensures that domestic entities retain control and decision-making power while still benefiting from foreign expertise, technology transfer and investment, Ahmed said.

Apurwa Masook, chief executive of space startup SpaceFields, said building a bustling private space economy requires infusion of big bucks, and liberalising FDI norms for space fosters growth of sunrise sectors.

"Local financing modes available have generally been risk-averse capital, hence easing the FDI norms will provide the much needed impetus to the sector, which will catalyse technology developments and ramp up manufacturing capabilities," Masook said.

The liberalised FDI entry slabs not only reinforces India as a favourable technology destination to invest, but at the same time protects our national interests given that space is a strategic area, especially when it comes to launches and access to orbit, Masook said.

On Monday, the cabinet amended the FDI rules for the space sector, allowing 74% FDI under the automatic route for satellite manufacturing/operations and satellite data products. It also allowed up to 49% FDI under the automatic route for satellite launch vehicles and up to 100% FDI under automatic route for manufacturing of satellite sector components and sub-systems.

However, TV Ramachandran, president, Broadband India Forum, which represents global satellite biggies such as Bharti-backed Eutelsat OneWeb, Amazon and Hughes, said while 74% FDI via automatic route is a step in the right direction, it is not adequate to attract the world’s biggest satellite broadband players to commit big-ticket FDI upwards of $10 billion. “The government must allow 100% FDI via the automatic route in satellite broadband services, akin to the telecom sector, to attract billions of dollars from marquee global investors into the satcoms space.”

Ramachandran added that without strong FDI inflows into satcoms, demand for satellite services won’t really take off in India, which, in turn, would weaken the government’s latest efforts to boost local manufacturing of satellite components/sub-systems by allowing 100% FDI in component manufacturing via the automatic route.

Without adequate user demand, local manufacturing of satellites equipment/components will suffer, the BIF president added.

Pawan Goenka, chairman of space sector regulator IN-SPACe, said opening up of FDI in the space sector is a “historic game-changing decision” that will propel India to new heights. “This will give a boost to participation by non-governmental entities (NGEs) in space research and manufacturing by opening the doors for massive investment and global collaboration," Goenka told ET.

Some satellite and tech industry executives, though, appeared a little disappointed with the amended FDI rules, saying 74% FDI via automatic route in satcoms may not be enough inducement to attract the biggest global satellite players to invest top dollars.

“The easing of FDI will enable Indian space startups working on capital-intensive space products to access the global pool of capital to expand manufacturing and production capacity," said Goenka. Indian space startups can now explore innovative business models to reach a growing addressable market around the world.

He added that the amended FDI policy for the space sector will allow NGEs to contribute to the vision of making India a global leader in the space sector. "It will empower them to develop cutting-edge products, expand our global presence, and grab a significant share of the booming global space economy. India's journey to becoming a space powerhouse is on track," he added.