indian aerospace market

India Market EntryRechtsanwalt S. Boll

18. Oktober 2011

� History in Brief

� Aerospace Clusters / Supply Chain / PSU / SEZ

� Offset-Policy & Opportunities

About this Presentation

− Identifying potential of the particular market

− Developing a fair knowledge of the market

− Creating strategies for market entry

− Target

− Implementation

→ Thanks to the previousspeakers �

→ Where is the main industrylocated? Suppliers, PSUs, SEZs?

→ Mainly regulated market entrydue to Offset Policies

→ Findings/Conclusions throughthe Offset opportunity

→ Joint Venture or Independent Entity in India

2Rechtsanwalt S. Boll (www.ra-boll.de)

History Aerospace Clusters Offset Policy

� 1911 First Airmail Service (Allahabad – Naini, carrying 6500 mails)

� 1940 Hindustan Aircraft Ltd

� 1942 Indian Institute of Science

� 1948 Aeronautical Society of India

� 1958 Defence R & D Org.

� 1959 National Aerospace Laboratories

� 1964 Hindustan Aeronautics

� 2001 Opening to private Sector

� 2011 Offset Policy Civil Aviation

- Large Public Sector Units (PSUs)Unternehmen, die dem Staatssektor zugehören.

- Luftfaht und Verteidigung waren bis 2001 ausschließlich den PSUs vorbehalten

- 2001 erlaubte der Staat ggü. Privaten mit einer „Industrial Licence“ teilzunehmen

- Defence Offset Policy 2006 / gefolgt von Liberalisierung in 2008

- 2011 Offset Policy Govt. of India & AIRBUS Industries / Civil Aviation


History & Development


Aerospace Clusters

New Delhi

Chennai

Mumbai

Hyderabad

Bangalore

Calcutta

S o u t hAerostructures

CIM tools

Dynamatic Technologies Ltd

Hindustan Aeronautics Ltd(HAL)

Pranitha

Quest

Recaero

Tata Advanced Materials Ltd

Titan

Triveni

PRS/IT

BAeHAL

CADES

HCL

Infosys

Infotech

Mahindra Satyam

TCS

Wipro

System & Equipment

Alpha Design

Ananth Technologies

ASTRA

BEL

Data Pattern

Detusch connectors

Goodrich India

HBL

ISRO (Antrix)

MachAero

Maini

Tyco

VEM Technology

Material

Mishra Dhatu Nigam Ltd. (MIDHANI)

Sundaram

System & Equipment

Applied Electro Magnetics Pvt Ltd

Precision Electronics

Samtel India Ltd

Tata Power

Material

Laxmi Precision Screws

N o r t h

Aerostructures

TAL

PRS/IT

Capgemini

Incat

System & Equipment

Amphenol

Eaton

Godrej

Material

Bharat forge

Hindalco Almex

Big Conglomerates

Kirloskar Group

L&T Group

Mahindra Group

Tata Group

W e s t

B r o a d o v e r v i e w o f t h e L o c a t i o n o f t h e I n d u s t r y

Rechtsanwalt S. Boll (www.ra-boll.de) 5


New Delhi

Chennai

Mumbai

Hyderabad

Bangalore

Calcutta

H e a d q u a r t e r s o f t h e S u p p l i e r s

Note: Core suppliers are highlighted in red color

•TAL New Plant

•HAL

•Dynamatics

•TAML

•Quest Old Plant

•Pranitha

•CIM Tools

•Triveni Hitech

•Titan

•Recaero

•Machaero

•Maini

•Taneja

Bangalore

C o im b atore

HyderabadN a g p u r

•TATA HQ

•L&T HQ

•Godrej

•Mahindra HQ

•Kineco

•Turbocam

•Quest SEZ

•Servo Controls

•TAL Okl Plant

P u n e

•L&T Composite

Va d o d a r a

Belgaum

G o a

M u m b a i

•L&T Precision Manufacturing

Division


•SKM

•MTAR

•Microtech

•TASL SEZ


New Delhi

Chennai

Mumbai

Hyderabad

Bangalore

Calcutta

B a n g a l o r e

REC AERO Precision

Machines parts

Safran

Eurocopter

TITEFLEX Flexible hoses Safran

SAFRAN

(Snecma-HAL)Pipes &

end fittingsSafran

GOODRICH Evacuation slides

Lighting systems

Power drive units

Airbus &

Boeing

TYCO Harness Airbus & Boeing

MACH AERO Precision

Machines parts

Safran

Eurocopter

THALES

( Thales- BEL)Radars Thales

GE Technology

CenterGE

SAFRAN Engg Center Airbus, Safran

ALTRAN Engg Center Airbus

ASSYSTEM Engg Center Airbus

CAPGEMINI Engg Center Airbus,

Bombardier

SILVER ATINA Engg Center Airbus, IAI

SONOVISION Engg Center Airbus

M u m b a iTHALES

(Thales-Rolta)C4ISTAR

information

systems

Thales

THALES

(Thales-Rolta)

Avionics

SystemThales

SOPRA Engg Center Airbus

N e w D e l h i

ROCKWELL Design Center Rockwell

H y d e r a b a d

ALTEN Engg Center Airbus

ATOS Origin Engg Center Airbus

LOGICA Engg Center Airbus

AXON

CABLEX

Harness

Harness

DEUTSCH

CONNECTOR

Harness

Schneider

CED

B a n g a l o r e

Suppliers are concentrated in the Western and Southern States of India



I n d i a n A v i a t i o n a n d S u p p l y C h a i nNumber of Businesses and Geographical Distribution

New Delhi

Hyderabad

Bangalore

Barrackpore

Note: Core suppliers are highlighted in red color

L u c k n o w

U t t a r

P r a d e s hH a r y a n a

• 2 Companies

P u n j a b New Delhi

G u j a r a t

Maharashtra

Ba n galo re

K e r a l a

K a n p u r

K o r w a

Barrackpore

K o r a p u t

Tamil Nadu

Hyderabad

• 9 Companies • 9 Companies • 9 Companies •HAL Lucknow

• HAL Kanpur

• HAL Korwa

• 14 Companies

• HAL Koraput

• 53 Companies

• 36 Companies

• 8 Companies

• 213 Companies

• 57 Companies (Nasik)

• 10 Companies



Public Sector Units

(PSUs)

New Delhi

Chennai

Mumbai

Hyderabad

Bangalore

Calcutta

PSUs are clustered mainly around Bangalore and Hyderabad.

Materials – Superalloys, Titanium, ...

77 M USD (FY 2009-10)

1500 employees

1 Location, 1 Manufacturing unit

Missiles & Weapon Systems

130 M USD (FY 2009-10)

2788 employees

1 Location, 2 Manufacturing units)

Shipyards

177 M USD (FY 2009-10)

5,500 employees

1 Location, 7 Manufacturing units

Shipyards

99.4 M USD ( FY2008-09)

1620 Employees

1 Location, 1 manufacturing unit

Goa

Electronics - Radars, Defence Communications,

Telecommunications

1.1 B USD (FY 2009-10)

11,700 employees

9 Locations, 11 Manufacturing units

Aeronautics ( Aircrafts, Helicopters,…)

2.37 B USD (FY 2009-10)

36,000 employees

7 locations, 11 Manufacturing units, 9 R&D centers

Space

0.2 B USD (FY 2009-10)

17,000 employees

16 locations,

18 Manufacturing units including R&D centres

Mining & Construction , Defence., Rail

775 M USD (FY 2009-10)

+12,600 employees

7 locations, 8 Manufacturing units)

BEL

HAL

ISRO

BEML

GSL

Garden Reach

Midhani

BDL



Special Economic Zones

(SEZs)

Special Economic Zones (SEZ)

Government of India

�State Governments introduce „Aero Parks“ in combination with tax benefits;

�Field of Business: Design, Production, Maintenance;

�Role Model: Dubai, U.A.E., China und Singapore.



New

Delhi

Chennai

Mumbai

Hyderabad

Bangalore

Calcutta

7 S p e c i a l E c o n o m i c Z o n e s ( S E Z ) h a v e b e e n s e t b y t h e C e n t r a l G o v e r n m e n t .India started the economic reforms and special economic zones a decade later than China. Bangalore, Mumbaialways toped the ranking as business metros for infrastructural and other financial incentives.Due to saturation other major cities like Pune, Hyderabad, Nagpur, Chennai and Kolkata are also attracting more investments.

Mumbai (Maharashtra)

Electronics, Gems

Kandla

Multi Product

Cochin (Kerala)

Multi product

Chennai (Tamil Nadu)

Multi Product

Visakhapatnam (Andhra Predesh)

Multi product

Falta Kolkata (West Bengal)

Multi product

Noida (UP)

Multi Product

Other 91 operational SEZs set by State Government

Policy :� SEZ is a designated duty free enclave and treated as foreign territory for trade

operations, duties and tariffs� Units can be set up for manufacturing, trading or service activity� Supplies from domestic tariff areas to SEZ units treated as deemed exports� 100% Income Tax exemption for 5 years and 50% exemption for 2 years

thereafter� 100% foreign direct investment (FDI) and full and free repatriation of export

proceeds permitted� SEZ units can dispose of rejects, waste, scrap in domestic market on payment of

duties � Sub contracting part of production is also permitted

Incentives :� Investment subsidy of 20% of fixed capital invested subject to a maximum of Rs.20

lakhs (0.05 Mil USD)

� Exemption from payment of stamp duty and registration fee on registration of lease deeds for plots/built up space in the zone.

� 25% rebate on power tariff for eligible software and IT enabled service units.

� In-house customs facilities to ensure speedy clearance of goods

� Dedicated power supply and Telecom connections on out-of-turn basis

(Source:

Indiaground.com)



Joint Venture

(JV)

Public ↔ Private

BAeHAL Software

Limited : Joint venture

company of Hindustan

Aeronautics Limited,

and BAE Systems, UK.

Deals with life cycle

software development

including design,

development, testing,

integration and

Independent

Verification &

Validation for various

aerospace and defence

applications.

Indo-Russian Aviation

Limited (IRAL): A Joint

Venture Company of

Hindustan Aeronautics

Ltd., ICICI Bank Ltd.,

RAC "MIG",

Aviazapchast PLC &

GRPZ. Deals with

Supply of spares,

rotables, consumables,

sealents for operation

and maintenance of

aviation equipments

for MIG fighter planes

Snecma HAL

Aerospace Pvt Ltd :

Joint venture company

of Snecma ( div of

Safran Group) and

HAL. Deals with

components & hoses

of CFM56 engines

SAMTEL HAL DISPLAY

SYSTEMS LTD : A joint

venture between


Limited (HAL) and

Samtel. Deals with

avionics requirements

of HAL cockpit displays

of all kinds. Involved in

system design,

development,

manufacturing, MRO

and obsolescence

management of

display systems, ATE

and IADS for all Indian

platforms.

HALBIT Avionics Pvt

Ltd : A joint venture

between Hindustan

Aeronautics Limited

(HAL) and Elbit

(Israel). Deals with

Avionics sub systems,

simulators and

training activities.

HAL-Edgewood

Technologies Pvt Ltd :

A joint venture

between Hindustan

Aeronautics Limited

(HAL) and Edgewood.

Deals with

semiconductors and

telecommunication

systems.

INFOTECH HAL Ltd : A

joint venture between


Limited (HAL) and

Infotech Enterprises

Ltd. Deals with design

services in the field of

aerospace -Aero

thermo and

mechanical design,

structural, stress,

thermal and rotor

dynamic analysis,

aeronautics,

computational fluid

dynamics, testing and

analysis, control

system design,

development and

software applications.

HAL-INCAT : A Joint

venture between


Limited (HAL) and

INCAT is a Tata

Technologies

company. Deals with

engineering and

design services of

aero structures.

Joint Ventures in Indian Aerospace & Defense Industry



Joint Ventures in Indian Aerospace & Defense Industry

SAMTEL-THALES : Samtel

Thales Avionics is a joint

venture between Samtel

and Thales for local

development, production,

sale and maintenance of

Helmets Mounted Sight &

Display (HMSD) and other

Avionics Systems destined

for the Indian market.

ROLTA - THALES: Rolta

Thales Ltd. (RTL) is a joint

Venture of Rolta with

Thales, France. Thales is a

world leader in Mission

Critical Information

Systems for the Defence,

Aerospace and Security

markets. RTL will take

advantage of technology

transfer from Thales for

developing state-of-the-

art Command, Control,

Communications,

Computers, Intelligence,

Surveillance, Target

Acquisition and

Reconnaissance (C4ISTAR)

equipment systems to

address opportunities in

the Defence, Security and

Aerospace segments.

AIRBUS - Airspace

Infrastructure Pvt. Ltd :

Airbus has formed a joint

venture with an Indian and

Turkish firm for spare

parts and logistics support.

The joint venture (Spares

Support Solutions India),

in which Airbus will hold

26 percent, will maintain

an inventory of rotable

components used on all

types of Airbus

commercial aircraft by

operators in India for sale

and exchange

Mahindra Group -

Gippsland Aeronautics Pty

Ltd & Aerostaff Australia

Pty Ltd : Mahindra &

Mahindra (M&M)

acquired 2 Australian

companies: Australia’s

Aerostaff Australia (AA)

and Gippsland Aeronautics

(GA). Gippsland makes

aircraft ( 8 seater and 18

seater) and Aerostaff

makes high precision

metal components for

companies in businesses

such as aviation and

defence equipment.

QuEST – MAGELLAN:

Aerospace Processing

India (API) is joint venture

between Magellan

Aerospace Corporation

and QuEST Global to

provide approved

aerospace surface

treatments.

TATA - SIKORSKY : Tata

group company Tata

Advanced Systems has

formed a joint venture

with US-based Sikorsky

Aircraft to make aerospace

components in India.

Sikorsky is a subsidiary of

United Technologies Corp.

The joint venture follows

the long-term contract

signed in June 2009

between the two

companies to assemble

Sikorsky S-92 helicopter

cabins



Offset Policy Overview

� Terminology, Rules & Regulations

� Which business is affected by this regulation?

� Market Entry Regulation vs. Offset Market Opportunity

� Emerging Trends in Indian Offset Market

� Findings/Conclusions for foreign businesses

Terminology

�Offset - signifies an element of 'compensation' as the predominant import of the term compensation / „Aufrechnung“

�India’s Offset-Policy requires foreign aerospace and defense firms getting contracts from Indian firms to engage local units for manufacturing.

�India’s Offset Policy differentiates between Civil and Military Aviation.



There are two different Offset

policies for Military & Civil

Aerospace in India



Aerospace and Defense Offset Policy in India

Offset policy in India

DPP-2003 DPP-2005 DPP-2006 DPP-2011DPP-2009DPP-2008

2005: Defense Procurement Policy (DPP-2005), to benefit Indian Defense Industry

Policy introduced 30% offset in contracts valued above Rs 3 billion under “buy” and 'buy and make” categories to develop Indian defense Industry

2nd Amendement 2008:

• List of products exempted from policy (Annexure-VI of

the DPP)

• Removal of license to private industry to participate in

offset programmed

1st Amendement 2006:

• Offset made mandatory as prescribed in DPP 2005 • Flexibility of forming joint ventures (JVs) with Indian firms • Establishment of Defense Offset Facilitation Agency (DOFA)

• further refinements, based on the experience and feedback from the defense industry, both Indian and foreign. • New definition of public and private sector within the DPP 2011


Civil Aerospace Products

mentioned in DPP-2011

1. All types of fixed wing as well as rotary aircraft including their air frames, aero engines, aircraftcomponents and avionics.

2. Aircraft design and engineering services.

3. Technical publications

4. Raw material and semi-finished goods.

5. Flying training institutions and technical training institutions (excluding civil infrastructure).


Civil Aviation Offset Policy

Civil Aviation Offset Policy between

the Government of India and Airbus

� Background: In 2006 the Government ownedAirline „Indian Airlines“ (now “Air India”) placed anorder over 2.1 Billion Euros.

� This was the kick-off for the civil aviation offsetpolicy, which is a private unpublished contract.

� Both offset policies work hand in hand, since theDPP 2011 announced that a public sectorprogramme can be considered under the civil aswell as the military offset policy at the same time.



Offset Outsourcing Areas in Indian Aerospace

Outsourcing Maturity in Aerospace

Future outsourcing areas

Engine control systems

Air control management systems

Navigation system

Emerging outsourcing opportunities

Embedded development

Control system design

Simulation

High-level aeronautical system design

Testing services

Cockpit equipment support software

Composite structuring

Currently being undertaken by Indian IT

vendors

Detailed design for modeling

Manufacturing

Drafting and field failure analysis

Non-core commonly outsourcedTesting, validation and verification

Technical documentation of designing work



Emerging Trends in Aerospace

Offset Opportunities in India

Emerging Trends in

Aerospace Offset

Opportunities in

India

Trend A

Trend B

Trend C

Trend D

Growing Engineering services outsourcing

(ESO) in India

Increasing defense

Budget spending

Increasing domestic players involvement in Indian defense industry

Increasing overseas suppliers involvement in Indian defense industry



Key Success Factors of

Offset PoliciesK

ey

Su

cce

ssFa

cto

rs



Ke

y S

ucc

ess

Fact

ors

2008 2016

JV with global Tier-1 and Tier-2 companies to enter the offset market.

Look for outsourced projects from HAL.

Repair and maintenance of components and Building of MRO Units –Maintenance, Repair andOverhaul

To get outsourced projects from Tier-1 or Tier-2 players from Europe and USA.

These Projects/components will be manufactured in India and then sold on the European and American markets.

Press Reviews

�„India poised to become world‘s thirdlargest civil aviation market.“ (AeromagAsia, Vol. V, Aug. 2011, page 8)



Implementation

�Joint Venture

�Independent Legal Entity e.g. Pvt. Ltd. (Company Act of India).



� This document provides certain general information existing as at the time of production. This presentation does not purport to identify all the issues or developments on the matters covered in this presentation. Accordingly this document should neither be regarded as comprehensive nor sufficient for the purposes of decision making. This information provided is not, nor is it intended to be an advice on any matter and should not be relied on as such. Professional advice should be sought before taking action on any of the information contained in it.

� This document may not be used by or distributed to any parties outside the Recipient.

Disclaimer


Sebastian Boll

Rechtsanwalt / Attorney at Law

Rothenbaumchaussee 71

D-20148 Hamburg

Tel. +49 (0)40 4450 6157

Fax. +49 (0)40 4450 6158

www.ra-boll.de

[email protected]

Thank you!
