Indian conglomerates making a move to diversify into the defence sector

India has emerged as one of the world’s largest defence markets and has announced numerous programs for the procurement of state-of-the-art equipment and weapons systems. India’s defence budget was estimated at $71.9bn for 2022-2023, making it the third-largest military spender globally. India was also the largest importer of defence equipment between 2017 to 2021. This led the Government of India to launch the ‘Aatmanirbharta in Defence’ initiative to reduce import dependency and build domestic defence equipment manufacturing capabilities. The initiative focuses on building a vibrant domestic ecosystem covering the design, R&D, testing, and manufacturing capabilities in the defence domain. Under this program, approximately 350 new industrial licences have been issued over the last seven years for defence manufacturing.

Tushar Mangure, Aerospace & Defense Analyst at GlobalData, comments: “Encouraged by multiple government initiatives to reduce import dependency, private players are now working on developing defence equipment manufacturing capacity to cater to the requirements of the armed forces. To overcome frequent programme delays, cost overruns and quality issues, the government is also looking forward to involving private companies in the development and manufacturing of defence equipment. The military modernisation initiatives to replace the Soviet-era defence systems have provided impetus for indigenous defence equipment manufacturing.

In addition to the well-established companies such as Tata Advanced Systems, Kalyani Group, Mahindra Defence Systems, Larsen & Toubro (L&T), and Ashok Leyland Defence Systems, several new Indian firms are making moves to enter the defence sector. The majority of the private investments are aimed toward the development of transport aircraft, armoured vehicles, artillery, air defence systems, missiles, and ammunition. However, over the last few years, the private players have also intensified their efforts towards the development of unmanned platforms for Intelligence, Surveillance, Target Acquisition, and Reconnaissance (ISTAR), equipment supply, and combat missions. They are also working on developing advanced design and simulation software to expedite the product development process. For instance, in 2019, Reliance Industries acquired an 83% stake in SankhyaSutra Labs, a simulation services company. Recently, Adani Enterprises has signed an agreement to acquire a 50% stake in General Aeronautics, a Bangalore-based drone manufacturing company. Adani-owned Alpha Design Technologies along with Elbit Systems‘ ISTAR Division has formed Vignan Technologies, a joint venture company for developing high-end defence technologies for local and global markets.”