SEEMA MUSTAFA | 5 JUNE, 2015
ADANI, AMBANI RACE FOR A SLICE OF THE BIG DEFENCE PIE
PM Narendra Modi with industrialists Anil Ambani and Gautam Adani
NEW DELHI: Prime Minister Narendra Modi, not very expansive in his favours, however rarely goes abroad without industrialist Gautam Adani and the Ambani’s as part of his entourage. Adani, of course, is a clear favourite being the closest to what can pass as a ‘friend’ of the Prime Minister. The Ambani’s are not in the same league, but clearly ahead of others insofar as current ‘favourites’ are concerned. And hence, given the fact that India has Rs 250 billion to invest in the defence sector in the next seven years---as advertised in its Make in India, Defence promo---it is small wonder that the two are racing to be there, in place, when the action begins.
Gautam Adani, whose fortunes have risen with PM Modi in that both moved out of Gujarat onto the national stage together last year, has decided to move from coal, oil to defence in what is a sudden addition to interests. Forbes, including Adani as #208 billionaire noted recently, “Indian port tycoon Gautam Adani's closeness to Prime Minister Narendra Modi sent shares of his companies, including flagship Adani Enterprises, soaring, boosting his wealth. Those gains plus new information about his individual holdings added $3.8 billion to his net worth.”
The Adani group registered a new firm---Adani Defence Systems and Technologies--in March this year. Reports suggest that the group is looking for partners with defence and aerospace companies like Italy’s Finmeccanica and Swedish Saab being mentioned as possibilities. Reports in the media suggest that Gautam Adani’s eldest son Karan has been playing a role in the defence negotiations, but the industrialists have chosen to remain out of the spotlights, refusing to comment to the media on this issue.
The Adani’s own the largest port and Special Economic Zone in Mundra, and are reported to be looking at using the SEZ as a hub for defence production. The ‘Make in India’ priority set out by PM Modi is clearly the galvaniser, with the Ambani’s for instance looking specifically at the Rafale jet fighters deal for sustenance and profit for their defence ambitions. They are the only Indian company to have a signed agreement with Dassault in France for the manufacture of components for the Rafale fighters. This coincided with the awarding of the big defence contract for 126 jet fighters to Rafale, under the UPA government.
PM Modi seems to have done away with the contract, by awarding the supply of 36 Rafale fighters to Dassault during his visit to France ‘in ready to fly condition.” There is no clarity still on what is the status of the remaining 90 aircraft originally negotiated, with statements from Defence Minister Manohar Parrikar adding to the confusion. The probability of construction of more Rafale fighters in India is not being ruled out, and if this is cleared and a contract signed, the Ambanis with the existing agreement with Dassault could well be ahead of all others in the queue. Mukesh Ambani is party to the agreement with Dassault for the supply of components for the MMCA fighter jets. However, it remains to be seen what Gautam Adani is able to rustle up in the meanwhile, as he is clearly competition with a capital C.
The Ambanis, being close to successive governments in India, have the advantage of decades of being on the national stage as it were. Adani has only just moved out of Gujarat, and is building an infrastructure to cope with all that could come his way. The Anil Ambani led Reliance group moved into the defence sector with Reliance Defence and Aerospace (RDA), Reliance Defence Technologies Pvt. Limited and Reliance Defence Systems Pvt. Limited. In an indication of his interest and resolve Anil Ambani beat contenders like the Mahindras to seal control of Pipavav Defence for taking his ambitions forward. Despite differences it is reported that the brothers are agreeable to leaving defence as a primary business for Anil Ambani who is racing ahead to expand the business with negotiations already on for helicopters and equipment for the Indian military. Interestingly the group is setting up a Smart City on 5000 acres focused on defence production and export. This will be named Dhirubhai Ambani Defence Park, after the siblings father.
Anil Ambani is hiring ex-military officers to head his defence companies. A former Air Force Wing Commander Rahul Dhingra was hired earlier. More recently Retired Vice Admiral H.S.Malhi has been appointed as the Group President and Chief Executive Officer of Reliance Defence Systems. "Malhi's expertise in strategic planning and execution, operational management, and joint ventures and partnerships will enable Reliance Defence Systems to realise its goal of creating India's foremost defence company, with an emphasis on the 'Make in India' programme initiated by the Prime Minister of India, thereby creating sustainable long term value for all stakeholders," a statement issued by the company said.
Reliance, is looking at the Rs 60,000 crores P-75(I) projects of the Indian Navy for six conventional submarines. Malhi, after retiring from the Indian Navy, was the Chairman and Managing Director of Mazagon Dock Limited, Mumbai and hence brings in rich expertise and contacts into his new office. Significantly in Mazagon Dock he had overseen the commissioning of INS Shivalik, Indian Navy's first indigenously built stealth frigate. The second and third ships of Kolkata class destroyers were also launched during his tenure. The Indian Navy is the only defence service to have moved ahead in its indigenous production program, with both the Army and the Air Force lagging far behind.
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