Defence Manufacturing in India : An USD 40 Billion Opportunity March 2016

Transcription

1 Defence Manufacturing in India : An USD 40 Billion Opportunity March 2016 Investment Opportunity Factor Market Report Series- EREP

2 Opportunity 1 Research Base $ 40 Billion Projected investment for FY Being the 3 rd largest armed force in the world, there s a need for Indian Defense sector to brace up their core in house manufacturing capabilities Funds for Capital Acquisition Total Capital Outlay for FY in USD Bn and its Breakup Total Capital Outlay 3 Time has come for India to leave the average behind and take a leap to go for global leadership in manufacturing. For Indian manufacturing to soar high and to reach at the top nosh level as per the global benchmarks, Make in India (MII) has given enough fillip to convert this into a reality. Like other manufacturing segments, Indian defense facet being no different is projected to be one of the highly investment seeking sector in the MII campaign. India has been rapidly enhancing its spending on defense year on year. Presently, India stands as the third largest defence spender in the world after US and China. Equipment spending by Ministry of Defence has increased 15-20% over the last five years and is projected grow at a much escalated speed in near future. Although, India is among the top ten military spenders in the world. However, unlike other geographies which have large defence industries to support their domestic needs, Indian requirements are primarily met by government players into the domain and imports. With importing nearly USD 5.5 Billion worth of military hardware, India has emerged as the largest arms importer in the globe accounting nearly 15% of such imports internationally. Hence self-reliance to sustain the needs of Indian defence sector is of vital importance for strategic and economic reasons. Since the government has been assiduously working upon building the defence manufacturing capabilities over the years. But to look beyond the customary curve, Make in India has triggered the positive sentiments for making India to stand at par with its global counterparts with respect to its in house defense manufacturing competencies. MII has provided a level playing field not only to the domestic public sector players and international giants to collaborate together but has opened opportunity gates for the domestic private players as well. This will not only significantly cut down the import burden but will also increase the presence of domestic players in the Indian defence manufacturing market. At present, about 50% of the defense manufacturing in India is dominated by the international players (via imports). With enhancing the participation of domestic players in the defense space, the share of imports is projected to drip down by 20-25% in 4-5 years down the line.

3 Research Case Opportunity 2 Domestic players projected to support 70 percent of the manufacturing in the Indian defense space by 2018, high investment opportunity for private players Exhibit 1: Import Dependence in Defence Across Key Economies and the likely Make in India Impact (In Percentage) of the UK spend is on foreign and 80 imports % 60% of India s spend is on 60 imports % of the US spend is on foreign and imports 15-20% of the India s spend would be on foreign origin players in JV s with domestic players Zero imports Current Scenario of India MII Impact by 2025 Source: MoD SRG Data, DoD Document on Foreign Sourcing, NETMA, SIPRI, ENINCON Analytics INFOGRAPHIC Domestic Origin Companies Foreign Origin Companies Imports Percentage Share of Key Nations in the Likely Market Share for Players in the Indian Defence Manufacturing Space by % 15% 55% PSUs Domestic Private Players Foreign Origin Players $130 Billion of Underlying Opportunity for private players by 2022 $ 33 Billion Worth defense equipment order has been placed During FY

4 Opportunity 3 Research Case ~ $ 25 Billion Worth Imports of Defense Equipments During FY 2014 France s Airbus in a JV with Mahindra to pour in invest to the tune of USD 2.6 Trillion in manufacturing defence helicopters by 2022 Percentage Share of Key Nations in the Defense Imports of India 35% 14% USA Russia France 41% For India to build a strong defence manufacturing base in future, collaborating with mature as well as developing markets is the need of the hour. Although countries such France, Russia,UK etc have been aiding India for its defense requirements since long. About 50% of the military imports of India were cumulatively driven by France & Russia over the past many years. But it s the time for India to take a step beyond the comfort zone by zeroing down the imports and applying manufacturing expertise pioneered in these nations.historically, India has always favored public sector over the private players in the defence production space. But, the growing demand of military equipments in the country coupled with the government s vision to make India a leader in global manufacturing is likely to change the old track and provide new pathways for private players to enter the defence manufacturing space. Not only the domestic private fellows but the international origin firms with expertise in catering the defence requirements have too found a breeding ground for expanding their business within the Indian periphery. Global giants like Dassault, Rafael, Airbus are projected to forge JVs with the Indian players in order to set up strong manufacturing capabilities and R&D bases for India s defence sector. It is noteworthy that investments to the tune of USD 1 Trillion or may be above are likely to be made via JV route. Not only the major domestic players but the SMEs too are projected to be the highest beneficiaries of increased defence production in the country. Huge supply chains, complying with world class standards will come up around the manufacturing facilities and would help the Indian SMEs to enter the global supply chain of manufacturers. $ 1.6 Billion Cumulative order booked of Tata Group in JV with Airbus, Honeywell in FY for defence & aerospace equipments

5 Research Case Opportunity 4 ENINCON S Difference Research Experts Insights/ Market view Germinates from minds that think fresh to evolve path finding guide for all stake holders through quality information & analysis ENINCON S Service Difference Emanates from seamless integration of domain expertise with first hand industry knowledge and customized research solutions at a very competitive cost Gist of the report in.pdf format for ready use Business Stakeholders/Partici pants Free Author support on report & Competitive cost Customized Research Solution Validated data & analysis ENINCON Research & Services Framework ENINCON Research Desk Opportunity mapping & Market sizing Research Reports First hand sector knowledge & inputs Primary research inputs from F2F interviews ENINCON Research reports delivering domain knowledge, market insights & future outlook

6 Research Objective Research Results join the Future now Opportunity 5 Research Objective & Results ENINCON Market series report on Indian defence manufacturing segment unveils the investment tune and the business opportunity track for the domestic OEMs Defence Manufacturing in India-Unleashing $ 40 Billion Opportunity examines the business case and market opportunity for domestic as well international OEMs in the Indian Defence Manufacturing Sector. The report unveils the investment targets, the procurement process, regulatory & policy landscape, opportunities for the private sector and the technology transfer from Know How to Know Why into manufacturing of defence equipments in India. 1. Understanding the structure of Indian defence industry and the spending pie. 2. Understanding the policy and regulatory landscape for defence manufacturing in India 3. Need of domestic manufacturing in defence sector in India 4. Defence procurement process in India 5. Underlying opportunities for the private players 6. Defence equipment market size & its outlook 1. Understanding the split of spending in Indian defence sector 2. Investment tunes and expansion plans of manufacturing base of Indian defence sector 3. Cutting down the dependency on the imports of arms and other defence equipments 4. Creating vibrant domestic manufacturing set up for Indian defence sector 5. Make in India and associated opportunities for the domestic manufacturers 6. Promoting defence industrialization in India

7 Key Queries Resolved What would be the planned spending on land systems? What would be the planned spending on naval systems? What would be the planned spending on aerospace systems? What would be the planned spending on electrical systems Segment wise planned defence manufacturing spending Identifying Assessing the eccentric Market size opportunities & outlook of defence manufacturing in India Market size and outlook for land systems? Market size and outlook for naval systems? Market size and outlook for aerospace systems Market size and outlook for electrical systems Must buy for Opportunity 6 What would be the scope of defence industrialization in India? Opportunities for Defence equipment industrialization manufacturers in India Opportunities for PSUs and the savings for Challenges and DISCOMs Enablers for defence Opportunities manufacturing in India for equipment manufacturers Identifying what would the key enablers for beefing up the defence manufacturing in India? What has been the key challenges that has set back the domestic manufacturing of defence equipments in India in past? Ministry of Defence Defence PSUs Defence Private OEMs (Domestic) Defence Private OEMs (International) Vendors Financial Institutions Other Lending Bodies Banks Consultants Research firms Research Bodies/Institutes Industry associations Sub contractors ENINCON Research reports evolve a path finding guide for all stakeholders through quality information and analysis

8 Opportunity 5 Contents & Coverage Opportunity 7 1. Executive Summary 2. Growth Paradigm of Indian Defence Industry 2.1 Indian Defence Industry A Know How 2.2 Policy Overview 2.3 Ease of Doing Business in India 2.4 Defence and Other Manufacturing in India : A Comparison 3. Defence Sector Spending Analyzing the Pie 3.1 XIIth Plan Expenditure and Growth Plan 3.2 Planned Spending on Land Systems 3.3 Planned Spending on Naval Systems 3.4 Planned Spending on Aerospace Systems 3.5 Planned Spending on Electrical Systems 4. Indian Domestic Defence Industry Structure 4.1 Defence Industry Structure in India An Overview 4.2 PSUs in Defence Sector and Value of Sales (VoS) 4.3 Ordinance Factories in Defence Sector 4.4 Key Private Players in India 4.5 Framework of Indian Defence Industry 5. Regulatory and Policy Landscape for Defence Manufacturing Sector 5.1 Defence Procurement Policy (DPP) 5.2 Defence Production Policy 5.3 FDI and Liberalization Policy 5.4 Research & Development Policy 5.5 Make in India Policy 6. Defence Procurement Process in India 6.1 Evolution of DPP A Roadmap 6.2 Procurement Pipeline for Defence Sector 6.3 Request for Interest & Request for Proposals 6.4 Understanding Defence Underspend 6.5 Reducing Process Cost 7. Defence Industrialization in India 7.1 Optimizing Value of Technology Transfer from Know How to Know Why 7.2 Role of International OEMs in India 7.3 FDI Policy Implementation & Results 7.4 Barriers to Entry in India s Defence Sector 7.5 Achieving 70% Indigenization Realistic Estimates 8. Creating Vibrant Domestic Manufacturing Setup in India 8.1 Cutting Down Imports 8.2 Address Political Hurdles 8.3 Adequate Budget Utilization XIth & XIIth Plan 8.4 Building Domestic Capabilities in Key Technologies 8.5 Tapping Export Avenues 8.6 Key Learning s from World 9. Defence Market Opportunity in India 9.1 Defence Industry Global Trends and Landscape 9.2 Defence Spending in India- Detailed Study 9.3 Defence Production in India 9.4 Defence Imports in India 9.5 Make in India Opportunities for Defence Sector 9.6 Opportunities for the Private Sector

9 Opportunity 5 Contents & Coverage a. OEMs b. PPP c. R&D 9.7 Offset and Export Opportunity for India a. Sales i. Technology ii. Equipments b. Services 9.8 Homeland Security Opportunity 10. Defence Equipment Wise Market Size & Outlook in India 10.1 Market Size & Outlook of Land System Equipments in India 10.2 Market Size & Outlook of Naval System Equipments in India 10.3 Market Size & Outlook of Aerospace System Equipments in India 10.4 Market Size & Outlook of Electrical Equipment System Equipments in India 11. Key Learning's to Improve Domestic Manufacturing in India 11.1 Dedicated Channel / Private Defence Companies a. Case Study : NDIA Structure of US 11.2 Segregation of Critical Technologies & Focus Research Areas a. Case Study : Defence Technology Strategy of UK b. Case Study : Priority Industrial Capability of Australia 11.3 Incentive Plan & Production Planning Support a. Case Study : Alternative Simplified Credit of US b. Case Study : R&D Tax Credit of US 11.4 Single Window Procurement Policy & Framework a. Case Study : Defence Equipment Support of UK b. Case Study: Defence Procurement Agency of South Korea Dedicated Source of Supporting Local Defence Ecosystem a. DIPS of Australia b. AIC of Australia Opportunity Key Implementation Challenges for Defence Manufacturing in India 12.1 Building Local Capabilities Setting Accountability 12.2 Policy Ambiguities & Contradiction 12.3 Poor Procedural Issues Mining Private Sector 12.4 Underspend Defence Sector Budget 12.5 Indigenous R&D Road Blocks 13. Identifying Key Implementable Drivers to Enable Defence Manufacturing in India 13.1 Setting National Defence Manufacturing Commission 13.2 Make & Buy/Make in India Mandate for Flagship Programme with Legitimate Financial Models 13.3 Implementing & Managing Rakshi Udyog Ratna (RUR) & Building Private Sector Capabilities 13.4 Defence Procurement Infra Improvement 13.5 Adequate Regulatory & Policy Support 14. Company Profiling of Key OEMs Present in India s Defence Space 14.1 Global Giants a. Lockheed Martin b. Northrop Grumman c. Boeing d. BAE Systems e. General Dynamics f. Eurocopters Typhoon g. Raytheon h. Finmecchanica i. Thales j. L3 Communicators k. Airbus

10 Opportunity 5 Contents & Coverage Opportunity 9 l. Rafael 14.2 PSUs a. HAL b. BEL c. BEML d. MDL e. GRSE f. BDL g. MIDHANI h. HSL i. OFB j. GSL 14.3 Domestic Private Players a. Tata Advanced Systems b. Larsen & Tubro c. Ashok Leyland d. Bharat Forge e. Mahindra Group f. Pipavav h. Godrej & Boyce i. Reliance 15. ENINCON s Perspective