defence-and-security-2010-indian-market-presentation.pdf

7/27/2019 Defence-and-Security-2010-Indian-Market-Presentation.pdf

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Indian Defence & Security Marketby :Harsh Mohan Puri Austrade &

Col. K.V. Kuber Aviotech Pvt. Ltd.


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India - Geo-Economic Background

Indian Defence

Overview

Expenditure

Expenditure Distribution

Equipment Modernization

Indian Security

Overview

Indian Procurement - Historic v/s Present

Indian Defence Procurement Procedures

Aviotech - Col. K.V. Kuber

Trends impacting segment - D&S

Agenda


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Demand Side Dynamics

Defence

Security

Supply Side Dynamics - D&S

SEZs in India

Indian Governments mandate

Creating an Ecosystem.

Andhra Pradesh - History of excellence

Viswakarma - Envisaged Capability

Viswakarma - A dream to reality

About Aviotech

Aviotech Group Co. - Deccan Chronicle : Presence across emerging sectors

Agenda


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How Austrade & Aviotech can assist in India?

Example of Definition of market

Expectations from Australian Companies

Opportunity - Offset related

Opportunity - Non-Offset related Other Opportunities.

Challenges.

Events in the market

Austrade Network in India

Contact point.

Agenda


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Economic reforms leading to very rapid economic growth Defense spending as a percentage of GDP decreasing,

but increasing substantially in real terms

End of Cold War

Transformed relationship with USA, Japan, ASEAN

Greater domestic interaction Growing economic links Emerging new international/security relationship

South Asia Internal security issues Maoist.. External threatsterrorism.26/11, nuclear proliferation Borders with China, Pakistan, Bangladesh,

Burma, Bhutan & Nepal Maritime security

India- Geo-Economic Background


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Indian Defence - Overview

Annual growth : 9.3 %

Expected spend by 2015 : U$42 billion

Army : U$11.76 billion Navy : U$10.5 billion Airforce : U$16.8 billion Misc. : U$2.94 billion

Major Threat areas Land Border, Maritime Security, Island Security & Exclusive Economic Zone

Procurement : Ministry of Defence, Government of India

Key focus : External Threats, Internal Threats, Disaster Response &Peace Keeping Operations

Procurement for Army, Navy and Air Force

Core Programmes Modernization of Radar capability Modernization of Army, Navy & Air Force Communication Technology Battlefield Management Systems F-INSAS (Future Infantry Soldier as a System)


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Indian Defence - Expenditure

United States56%

China9%

France6%

United Kingdom6%

Russia5%

Germany4%

Japan4%

Italy4%

Saudi Arabia4%

India2%

2010 Defense Expenditure - for top 10 countries

World Spending $1464 billion, India spending $30 billion

The Global defence expenditure is currently estimated to be worth more than $1.465 Trillion. USA is the single largest

defence spender at $ 607 billion, which is equivalent to 40% of the world expenditure. Indias share is $30 billionwhich is 2.1% of world defence spending.

Indias Defence Expenditure

Indias defence expenditure is expected to be U$42 billion by 2015. Indias expenditure has been growing since2001. The current years spending has placed India amongst the top 10 spenders worldwide. Indias growth rate inexpenditure on defence is roughly 9.3%, which is amongst the top three in the world.

500

540

560

600

770

820

860

930

1050

1420

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Defense Expenditure - India (Rs. in billion)


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Total Defence Expenditure Distribution - India : Army, Navy, Air Force : U$ 100 billion (2010-15)Army : 46%; Air Force : 30%; Navy : 19% and Others : 6%

Air Force29%

Navy19%

Army46%

Others6%

Total Capital Expenditure Distribution - India : U$42 billion(2010-15)

Army : 28%; Air Force : 40%; Navy : 25% and Others : 7%

Air Force40%

Navy25%

Army28%

Others7%

Indian Defence - Expenditure Distribution


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Indian Defence - Equipment Modernization

Profile of Equipments

The current profile of equipment held by the Indian Armed Forces with regards to State of the Art, Matured and

Obsolescent equipment is 15%, 35% and 50% respectively. The required/target profile with regards to State of the

Art,Matured and Obsolescent equipment is 30%, 40% and 30% respectively.

State of the Art15%

Matured35%

Obsolescent50%

Current profile ofequipments in 2010

State of the Art30%

Matured40%

Obsolescent30%

Target profile ofequipments by 2020


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Indian Security - Overview

Annual growth : 16%

Expected spend by 2015 : U$9.7 billion

Coast Guard : U$4.5 billion Maritime Security : U$1 billion Airport Security : U$3.2 billion Sea Port Security : U$0.5 billion Others : U$0.5 billion

Major Threat areas

Border, Airport, Critical infrastructure, Maritime, Mass Transit Systems & Corporate

Procurement : Ministry of Home Affairs, Government of India

Key focus : Militancy, Policing & Disaster Response and support State Governments Procurement for Border Management, Paramilitary Forces & NIA

Core Programmes

Para-Military Modernization & Augmentation Coastal Security (Fast interceptor Boats) MPF Modernization of Police Forces Border Management Airport Security : Development of airport infrastructure Anti Terrorism and Counter Intelligence Training


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Indian Procurement - Historic v/s Present

Self-reliance v/s Partnerships & Alliances

Minimal role for Priv ate Sector

Indigenous v/s Licensed production

Re-inventing the wheel

Post acquis i t ion impediments to technology absorpt ion

Emphasis on domestic production v/s flexible Off-set policy

License product ion by s tate contro l led PSUs

Bui ld ing on domest ic R&D and product ion DRDO

Regional standards v/s Global

high expectat ions for ind igenous prod ucts rarely achieved

Contracting difficulties

inabi l ity to s pend procurement funds in a t imely manner


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Indian Defence Procurement Procedures

1. Buy Global

2. Buy and Make

3. Buy and Make Indian

4. Buy Ind ian

5. Make


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Aviotech - Col. K.V. Kuber

28 years in the Indian Army, Communications and Electronics Warfare specialist, commanded an EWBattalion in operations, widely experienced in the Indian Army. Presented a paper in CMC, Albuquerque,USA, in July 2000.

Three and half years in Ministry of Defence as Director - Capital Acquisition Programmes

Was chosen to be charged with Additional responsibility of Director DOFA

Implemented 23 programs with offsets through the complete acquisition process

Oversaw more than 300 capital acquisition programs of all three services Well versed with Defence Procurement Procedures

Attended International course on Foreign Mil Sales concerning USA DoD procurements

Founded the DOFA in the Ministry in 2006 and part of offset policy formulation since 2005

Founded the Religare Strategic Advisory in corporate and led a team there successfully

Founded the Aviotech Strategic Advisory and put together a strong team here.

Advisor on the Defence Committee of Confederation of Indian Industry (CII), FICCI, Assocham.

Advisor on Offsets with Indo Russian Chambers of Commerce, Indo- American Chambers of Commerce,American Chambers of Commerce(AMCHAM), Electronic Industries Association of India (ELCINA),Society of Indian Aerospace technologies and Industries(SIATI)

Advise a number of OEMs and Indian Industry on Defence procedures and Offsets


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Trends impacting segmentD&S

DPSU

Traditional DPSU supplychain involving

thousands of partnerseach operating atcomponent level

capability

DPSU

Emergence of layers of mid-chainplayers with increasing outsourcing by

DPSU thereby leading to a leanerDPSU in terms of manufacturing

capability

EMB 145 Phenom

Global Example of Supplier

Reduction : Embraer

Risk Sharing Partners Other Partners

1990s 2007

4 RiskSharing

partners outof 350

16 RiskSharing

partners outof 38

Trend 1 : Emergence of a tiered manufacturing structure Traditionally DPSUs were playing the roles of primes but with significant in-house production capability spread across the entire production

process and little outsourcing beyond component level supplies As a result they were managing thousands of vendors as suppliers, each with component level capability and very little tiering throughout the

supply chain. For example OFB has 8000+ vendors and HAL has 2500+ vendors. Globally A&D primes have reduced the number of suppliers and are increasingly having more risk sharing partners. Indian A&D Segment too is seeing tiering emerging in the A&D supply chains and mid chain players with composite capabilities emerging.


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Trends impacting segment D&S

Trend 2 : Competitive Advantage coming into play As A&D supply chains globalise, there is a gradual shift of work to locations that have the maximum competitive advantage in

terms of cost. Offsets are providing Indian A&D manufacturers / suppliers opportunities to integrate into the global A&D supply chains. In view of the above, there are some segments that are booming / expected to boom. Some prominent examples are Engineering

Design, Composites (Hand layered : work shifting from EU and US) and Surface Treatment (work shifting out from EU)

Engineering Design

Movement on account of economic costadvantage

Surface Treatment Movement on account of easier environmental

regulation

Composites Movement on account of economic cost

advantage


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Trend 3 : Increasing De-regulation and De-licensing

A&D manufacturing in India has traditionally been license oriented with a large number of bureaucratic hurdles formanufacturers entering this space.

Post 2008, a large number of these hurdles for component/assembly level manufacturers have been removed. Licensing still remains necessary for platform manufacturers.

Trend 4 : Efforts towards evolving a public-private-partnership model for

strategic projects

The Government has, since 2005, tried to evolve a model of public private partnership for new projects. Under the approach, there is shared ownership of key projects between private sector, services, DPSUs and the DRDO. Key successes of this model is the Pinaka Multi Barrel Rocket Launcher and the work done by L&T on the nuclear

submarine.

Trend 5 : Increased transparency in capital acquisition

The government has tried to increase transparency in the defence acquisition process by making the process time-bound.

The government has also initiated steps towards planned and structured disclosures on capital acquisition programmesthrough RFI/RFP releases.

Trends impacting segment D&S


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Offset Driven Exports Consumption within India

Demand Side Dynamics - Defence

Export Demand Domestic Demand

Direct Exports

DPSU/PSU/OFBDriven Demand

Services DrivenDemand

Private sector DrivenDemand

Very few business segmentsthat can command worldmarket demand on the basisof inherent competitiveness

Strong linkage to India as aexport base for automotivecomponents.

Existing Areas of Strength :IT/ITES/Engineering DesignServices

Upcoming Areas of potential: Simple compositestructures, forgings andstampings

Market potential estimated :USD 2-3 Bn. over the next 8years

Typical Player profile HAL - Airborne Platforms OFB Small arms Bharat Forge

Focus area driven by offsetobligation on OEMs.

Rapid expansion of segmentsthat are being leveraged foroffset linked manufacturing

Existing Areas of Strength :

IT/ITES/Engineering DesignServices

Upcoming Areas of potential :Precision Machining,Fabrication, Compositestructures, Castings, SurfaceTreatment, Fasteners,Electronics, Avionics(Component level), Electricalequipment, Fasteners,

Harnesses and Cableassemblies

Market potential estimated :USD 12-15 Bn. over next 8 yrs

Typical Player profile Elaborated in later slides

Very large andSignificantdemand arisingfrom DPSU driven

Makemanufacturingprogrammes

Existing base ofover 10000+suppliers spreadacross HAL, BEL,OFB and BHEL

Market sizeestimated : USD18-20 Bn. over thenext 5 years

Army baseworkshops, NavalDockyards, Airforce Base Repair

Stationscontribute tominor demand

Limited supplierbase with limitedcapability

Market sizeestimated : USD0.8-1 Bn. over thenext 5 years

Private playersemerging both asprimes as well as tier1/ tier 2s

Significant additionsare JVs betweenIndian and Globalplayers which havebeen created toaddress A&Dmanufacturing needsin India

Typical player profileincludes JVs of Tata,Mahindra, L&T etc andprivate players likeL&T, PEL, AlphaDesign etc.

Market size estimated :USD 3-5 Bn. over thenext 5 years

Total Market Potential

Estimate

USD 1418 Bn. over the next

8 years

Total Market Potential

Estimate

USD 2226 Bn. over the

next 5 years


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Supply Side Dynamics - D&S

Upcoming Aerospaceclusters

Naval Manufacturingclusters

Upcoming and existingNSG hubs

HAL factory clusters

BHEL Factory clusters

BEL Factories

OFB Factories

24,500 private sector A&D / HLS

channel partners

Indias strategic manufacturing spread


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SEZs in India - Indian Governments mandate..

Quote

The EEPC for this initiative is being supported by

Religare Strategic Advisor y w hich has also requested

Col. K.V. Kub er (Retd.), Head of Defen ce Initi atives , M/s.

Aviotech Private Limited, to suppor t the in i t ia t ive

through a focussed study / outreach programm e. We

request you to sup port th is in i t ia t ive of the Governmentof India by g rant ing appropr iate t ime and audience to

the team from M/s. Aviotech to com e and pr esent to you

the signif icant opp ortunit ies of fered by India as a g lobal

manufactur ing hu b during their vis i t to Aus tra l ia and

USA in November and December 2010.

-EEPC INDIA, Ministry o f Commerc e,

Government of India


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SEZs in India - Creating an Ecosystem.

Viswakarma Technopolis

A Sri Kubera Infracon Ini t iat ive


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Andhra Pradesh - History of excellence

Natural Endowments 5th largest state in India, in terms of area.

2nd largest store house of mineral resources in India.

2nd longest coastline : 970 kms Rs.1.8 Bn marine exports.

Significant Natural Gas resources ( Over 30 TCF KG Basin)

Industrial Strength

Leadership across India

Agro-based industries

Cement and Granite

Paper.

Bulk Drug Capital & Biotech

Diversified industrial base

Globally recognized and fastest growing base for IT enabledservices, exports up to $ 1 billion.

People Strength

Large pool of skilled workforce with 26 Universities turning out95,000 Engineers / year, 110 Polytechnics, 600 it is.

Proactive Governance : first to have a comprehensive SingleWindow Clearance Act in place.

Consistent governance to promote industry

Intent to develop AP into a global industrial powerhouse

Ship BuildingFertilizers

Hi-precision Machine Tools

Drugs and Pharma

Cement

Paper

Power Gen Equipment

Electronic Hardware

Long Range Missiles

Castings and Forgings

Defence Electronics

Ceramics

Etc..

Key Industries of the state


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Viswakarma - Envisaged Capability

Forgings

Castings

Surface Treatment

Fabrication

Sheet Metal work

PrecisionMachining

CompositeStructures

Compositelayering

PrecisionMachining

Support Environment

A unique manufacturing cluster with multi-capability siteA one-stop-shop solution for all Strategic industry manufacturing needs

Metallicsand

MetallicsprocessingTechnologies

Composites

processingTechnolgies

TestingAnd Quality Control

Engineering DesignCentres

Rapid PrototypingCentres

Logistics hubs

Structures I Electrical Systems I Hydraulics I Control Surfaces IPrecision Engineered Components I Electronics I

Aerospace

Defence

Marine - Naval

Nuclear

HomelandSecurity

IndustriesServed


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State Participation : APIICs participation in the Manufacturing Park

Incentives for industry to participate in the manufacturing park : Designated duty free enclave and to be treated as foreign territory for trade operations and duties

and tariffs.

Licence exemption required for import.

Exemption from customs duty on import of capital goods, raw materials,consumables, spares etc.

Exemption from Central Excise duty on procurement of capital goods, raw materials, consumable

spares etc. from the domestic market.

Reimbursement of Central Sales Tax paid on domestic purchases.

100% income tax exemption for a block of five years and 50% tax exemeptions for five year thereafter under section 10-A of Income tax Act.

Reimbursement of duty paid on furnace oil, procured from domestic oil companies

Units may be for manufacturing, trading or service activity.

100% Foreign Direct Investment in manufacturing, sector allowed through automatic route barringa few sectors.

Facility to retain 100% foreign exchange receipts in EEFC Account.

Facility to realize and repatriate export proceeds within 12 months.

Re-export imported goods found defective, goods imported from foreign suppliers on loan basisetc. without G.R. Waiver under intimation to the Development Commissioner.


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State Participation : APIICs participation in the Manufacturing Park

Incentives for industry to participate in the manufacturing park No cap on foreign investment for SSI reserved items.

Exemption from industrial licensing requirement for items reserved for SSI sector.

Full freedom for subcontracting including subcontracting abroad.

Duty free goods to be utilized in 5 years.

Job work on behalf of domestic exporters for direct export allowed.

No routine examination by Customs of export and import cargo.

Support services like banking, post office clearing agents etc. provided in Zone Complex.

Exemption from Custom/Excise Duty on goods for setting up units in the zone.



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About Aviotech

A U$ 3 Billion group set up for Aerospace and Defence based out of Hyderabad

Create niche capabilities in Aerospace Manufacturing processes

Fully owned by Directors of Deccan Chronicle Holdings

Hosts three companies within the group, Airline Business, MRO for Business jets,

Defence Manufacturing and Defence Research & Development

A young and vibrant culture that thrives on initiative and innovation.

Strong promoter backing

Huge investments committed for growth of Indian Defence Industry


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Aviotech Group Co. - Deccan Chronicle -Presence across emerging sectors

RetailMedia

Deccan Chronicle Holdings

One of the Indias

Exquisite retailhousesOdyssey along

with other high endproducts, such aswriting instrumentswith Editions andJaguar Land Rover

cars with In Line 4Motors.

Worlds Ninth

largest EnglishDaily incirculationDeccanChronicle.

Internationalpresence,owners of AsianAge (London).Publisher of TheNew York Timesand InternationalHerald Tribunein India.

Sound partnershipfor VC fundingopportunities.

Aviotech - nonscheduledcorporate Jetoperator plannedto be largest inIndia.MRO for Business

Jets.GSA for Air Lanka.

India TravelBureau.

ITFinancial Services Aviation & Travel

Two IT companies aspart of the parentgroup SigerSolutions andNetworkTechnologies.

Group Vision To Build Aviotech as a Global Trusted Brand in the Composites Domain in Composites Manufacturing withsound Research and Development initiatives and Present it as the Global Leaders in Composites Technology

Aviotech DefenceAdvisoryServicingaerospace,defence andhomeland securitysegments ; Uniquemodel withcomplete Advisory

services

Aerospace &Defence


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How Austrade & Aviotech can assist in India?

Market entry Market scoping for opportunities in Defence & Security space Market intelligence on specific opportunities

Partner Identification and Support Identification of partners (Representation/ JV/ M&A / Licenced Manufacture / Sourcing) Developing Supply chain solutions

Operations Support Facilities planning and establishment including participation in SEZs / Industrial parks Support for vendor and supply chain financing Regulatory compliance and control

Offset Advisory Offset project planning and process compliance Offset project monitoring and management Offset documentation and process control Negotiation support for offset projects


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Example of Definition of market

Contract Manufacturing

Design

Maintenance

SERVICES

CommunicationRobotics & Mechatronics

Hydraulics Mechanics

Strategic

Electronics

SeekerBattlefield

TransparancyShooter

Seekers

Aerostats and Components

Radars and Components

Sonars and Components

Surveillence CamerasSatellite Based Electronics

Ground based sensors

Vehicle mounted electronics

Radio and Communication Electronics

Shooters

On-board electronics

Fire Control Systems

Aircraft electronics

Battlefield Transparancy

UAV components

Communication Electronics

Command and Control Electronics

Indicative Examples.

Optics

QA


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Expectations from Australian Companies.

1) Market Understand the market

2) Opportunity Assess/ Create the opportunity

3) Engage Engage with the stake holders/ Generate interest

4) Educate Educate customer/ channel partner

5) Market Access Identify market approach

Own set up / import Joint venture with Local Partner


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Opportunity - Offset related

S. No. ProgramCost

(U$ Billion)

Offset

(U$ Billion)Participants

1 MMRCA 10 5Boeing, LM, Saab, EADS,

Dassault, MiG

2 MRH 3 0.9

Eurocopter, AugustaWestland, Kamov

3Towed

Howitzer1.8 0.6

BAE Land Systems, ST

Kinectics

4 Wheeled Gun 1 0.3Kerrametal, Rheinmetal


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Opportunity - Non-Offset related

S. No. Program Description Electronic Components1 F-INSAS Transform the modern day soldier into a

mobile, lethal and yet light fighting unit.

Hand held, Ruggedized

computer, Power Packs,

Sensors (NBC), Data

Links, Com Links

2 BMS Make the brigade Commanders and above

fully aware of the Battlefield situation in real-

time and also enable them to provide strategic

inputs to the fighting units.

Data Links, Com Links,

Desktop Ruggedized

Computers

3 Coastal

Security

After 26/11, entire coastline of the country is

going to be put under constant surveillance.

Radars, Scanners,

Proximity Alarms

4 POLNET/

CCTNS

All the police stations in the country will be

connected via a dedicated and secure

network for sharing data. All data on criminalswill be stored on a central server and this can

be accessed at all times by police stations

across the country.

Computers, Data Links,

Bio-Metric Scanners, etc.


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Other Opportunities.

Communication Devices Security Systems Coastal Security (Radar Sensors, etc) Surveillance equipment, Night Scanners Electronic Warfare Access Control

Explosives & IED Detection and disposal systems Fast Patrol Boats Interceptor Boats Data collection tools Integrated disaster management systems Intruder detection in multiple environments Personal Protection Gear

Intelligent Transport Tracking System Component Manufacturing (Precision machining, Metallurgy, Forgings, etc) CCTNS (Crime & Criminal Tracking Network & Systems) Training
http://upload.wikimedia.org/wikipedia/commons/b/b1/Delhi_Airport_India.jpg


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Challenges.

Slow procurement procedures

Effective local partnerships

Focus on developing local industry ambitious acquisition program

Dependence on manpower intensive measures

Multiple agencies


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Name : Aero India 2011 Date : 9-13 Feb. 2011 City : Bangalore Target Segment : Aerospace, Defence & Homeland Security Website : www.aeroindia.com

Name : INDESEC 2011 Date : 20 - 22 June, 2011 City : New Delhi Target Segment : Defence & Homeland Security Website : www.indesec-expo.com

Events in the market
http://www.indesec-expo.com/page.cfm/NewSection=Yes/GoSection=0


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Austrade network in India

Mumbai

Chennai

Kolkatta

Delhi

Bangalore

Hyderabad

Chandigarh

Pune

Ahmedabad

Jaipur

Kochi

The most extensive network ofany country in India with 11offices

Major office in New Dehli,

Mumbai and Chennai

Presence in Hyderabad,Bangalore and Kolkata,

Recently established offices in

Jaipur, Chandigarh, Ahmedabad,Pune and Kochi


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AviotechCo l. K.V. Kuber, Head Defence Init i at ives

Mob ile : +91 7838460333; +91 9999027070

Email : col.kub [email protected] ; col.kuber@gmail .com

AustradeHarsh Mohan Pur i , Bu siness Developm ent Manager

Mobi le : +91 9958445815

Email : harsh.pu [email protected] v.au

Contact point.


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Thank you!

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