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Ashok Leyland Defence Systems, KMW to Jointly Develop Advanced Defense Systems

We have to build capability to utilise offset credits

The Hinduja group declared its intention of being a serious player in the promising Defence equipment business when it signed an MoU last month with a well-known German company, Krauss-Maffei Wegmann, to collaborate in the development of advanced Defence systems. A new company, Ashok Leyland Defence Systems Ltd., has been created with flagship, Ashok Leyland, holding 26 per cent equity in it. Spearheading the group's foray into the Defence equipment business is Dr V. Sumantran, Executive Vice-Chairman, Hinduja Automotive, and Chairman, Ashok Leyland Defence Systems. In this interview with Business Line, Dr Sumantran sets out the rationale for the foray into the Defence and aerospace businesses.

Excerpts:

Q. Could you elaborate on your strategy for the Defence business?

We've had a good Defence business for sometime. But we felt that running a Defence-oriented activity within a large automotive company was not giving it the right amount of focus...

...Q. How did you zero in on your partner for the Defence business, Krauss-Maffei Wegmann (KMW)?

We talked to several partners and zeroed in on this prestigious German company, KMW. They are the Porsche of the Defence business. Very, very high-end products, high performance, but not very high volumes.

The NATO's main battle tank, the Leopard 2, is a KMW product. I had a ride in it and all I can is that it is staggering. It's a tank that drives like a sports car, no exaggeration.

They have other products like artillery, they have the Dingo which is an armoured personnel carrier, protected from mines, rocket propelled grenades… it can run over dunes at 80 km/hr. We are now developing a number of new products with them. The new company will expand its product range. Initially, we'll use some of the ALL facilities on loan but, eventually, we'll set up our own limited volume production for the specialised vehicles, including armoured vehicles. We've already started with some of the prototypes building at our plant near Sriperumbudur.

Q. Will ALL's existing Defence business move into the new company?

Not all of it. We've got a good stable product in Stallion, which will continue in ALL, but several new programmes will move into the new company...

...Q. What is the scope of the KMW MoU?

It covers armoured vehicles, tracked vehicles, wheeled vehicles, artillery and special purpose applications such as bridge laying equipment.

Q. So you will pay only a technology fee to them for each of these?

No, some of these we may end up producing together for not only the Indian market but for other markets. In some others, it will be oriented predominantly towards the Indian market. That will determine the structure.

Q. So, you are not offering them an equity stake to start with?

We have decided we'll wait and see how each of these projects shapes up. At that stage, we are flexible to do whatever makes sense.


More about it and their plans to enter the civil and military aerospace market here:

Business Line : Opinion : ‘We have to build capability to utilise offset credits'
 
Military industrial complex dependent on foreign money is counter-productive.

A better approach would be, take over small defence and IP firms abroad and work with Indian brains at home(IIT's, IISc). Slow is better and more healthy.
 

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