NEW DELHI (Reuters) - India's Reliance Group said on Monday it had tied up with Dassault Aviation SA (PA:AVMD) to help the French company spend up to 300 billion rupees ($4.51 billion) that it must invest in India as part of a recent fighter jet deal it clinched.
India, the world's largest arms importer, requires foreign defense companies to invest a percentage of the value of deals that they have been awarded into India to help the country build its own manufacturing base and wean itself off imports.
Dassault agreed to invest 50 percent in so-called offsets of the $8.7 billion deal it signed with New Delhi on Sept. 23 to supply 36 of its Rafale fighter jets. Reliance said the offset contract is India's biggest ever.
Billionaire Anil Ambani, whose Reliance has virtually no experience of defense manufacturing, hopes to turn his company into a major defense firm over the coming years.
The agreement with Dassault is a bet that Reliance can build manufacturing facilities at a site in the central Indian city of Nagpur to feed into Dassault's supply chain, or for future Indian government orders of the Rafale jet.
A person familiar with the agreement said part of the 300 billion rupees in offsets would be spent directly on Reliance manufactured products, and part would be spent through other Indian manufacturers, depending on which company could best carry out the work. The person was not authorized to speak to the media about the agreement and so declined to be identified.
"The formation of this Joint venture with Reliance Aerospace led by Anil Ambani's Reliance Group illustrates our strong commitment to establish ourselves in India and to develop strategic industrial partnerships under the 'Make in India' policy promoted by the Indian Government," Dassault Chief Executive Eric Trappier said in a statement.
Senior executives told Reuters in May that Reliance had bid for 840 billion rupees in government contracts, but was yet to win any.
Other Indian companies with an interest in defense and aerospace include Tata Group, Mahindra Group and Larsen & Toubro Ltd (NS:LART).
($1 = 66.5425 Indian rupees)