Aero India 2019: L&T Bets On Indigenous Capabilities For Submarine, Battle Tank Orders

Larsen and Toubro Ltd. is betting on capabilities it has built over the last decade to make submarines and battle tanks along with a foreign partner.

The defence forces sought request for information last year for submarines and battle tanks in addition to helicopters and fighter jets, Jayant Patil, wholetime director and head of defence business at India’s largest infrastructure company, said. And a private player like L&T is prepared as the company has attained indigenisation, he said.

The company expects the expression of interest for submarines and tanks by the second half of the year and orders to trickle in a year or two.

L&T runs 10 factories, three R&D and other development centres for defence. It’s been involved in constructing the hull of India’s first nuclear submarine— INS Arihant. It also started production of K9 Vajra armoured vehicle recently at Hazira, Gujarat.

“We have invested in excess of Rs 7,000-8,000 crore in the last decade to build defence capabilities far more than any other player in the India,” said Patil. “We see the opportunities now getting in place which we didn’t see earlier.”

The company is the sole private player to pitch for the strategic partnership programme for submarines, said Patil. “Since we are alone, the pricing could be arrived at the cost at which public sector units manufacture or a competitive pricing process.”

The other player in fray was Reliance Naval and Defence Ltd. but the company is now under insolvency process at the National Company Law Tribunal. The strategic partnership program requires the Indian partner to have significant balance sheet strength.

Patil said five years ago not more than 5 percent of the orders were earmarked for the private companies, which were considered for only supplying parts. This has changed.

The government has put more and more orders under competitive bidding against nomination done earlier, he said. Orders worth Rs 4.5 lakh crore are expected and half of them are available to the Indian private sector on a competitive basis, he said.

The government eased and simplified payments, bank guarantees and trial period extension and that, Patil said, brought down the financial stress on private companies willing to participate.

But the pie is not growing. The defence budget has not moved up in the last few years. “If you have the same budget, you buy less,” Patil said.

 bloombergquint