More and more Indian companies, including steelmakers such as Tata (NS:TISC) and Essar (BO:ESAR), are entering the defense manufacturing sector. Essar Steel, for example, recently announced a game plan to develop steel grades for land and naval defense applications.
Essar Steel made a low key entry into the sector about five years ago, but it’s now turned bullish on defense because of the increased marketability of its products. Essar’s products include an indigenous armor plate for ballistic protection. Some of its products are innovative while others are simple substitutes for imports for India’s native contractors looking to keep more of their supply chains close to home. The latter have been used in the construction of naval destroyers, offshore patrol vessels and floating docks. Other products are used in the construction of Coast Guard vessels, so also the repair of naval ships.
In land defense, Essar Steel’s products are used in battle tanks, the motor casings of missiles, combat vehicles, and artillery guns.
The steel major has already set up a 1.5 million metric ton a year, 5-meter-wide steel plate facility for the defense sector products. It now wants to increase its participation in the indigenization of defense products, including offshore patrol vessels and submarines.
Make in India: Defense Edition
The past few years have seen more players like Essar getting into defense, which is experiencing exponential growth. The stakes are pretty high. One estimate has it that the expenditure in the defense sector in the next five years could cross $200 billion.
The Defence Procurement Policy 2016 encourages Prime Minister Narendra Modi’s “Make in India” policy and supports indigenous manufacturing of defense equipment and even spare parts. The policy aim is to achieve an indigenization level of about 70%. Right now India’s companies supply only 40% of the products used for its national defense.
Indian defense manufacturing was once a near-monopoly that welcomed only a few public sector units. But, under the Modi government of late and even before, private groups like Reliance Industries Ltd., Tata Group, Mahindra Group, Hinduja Group and Adani Group have all gotten into the defense game.
The statistics speak for themselves. Between January 2001 and February 2016, the Commerce Ministry granted 333 industrial licenses to private firms for defense manufacturing, according to data provided by the Department of Industrial Policy and Promotion. For now, although India is one of the largest importers of arms in the world, indigenization of defense products is expected to bring down its reliance on imports, currently at about 14% of global arms imports.
Tata Steel Defense Products
The Tata Group, for example well-known for Tata Steel, has more than eight companies in the defense manufacturing sector. These companies include Tata Advanced Systems Limited, Tata Consultancy Services, Tata Advanced Materials Limited (TAML), Tata Motors Limited, Titan Company Limited, Tata Steel (Specialty Steel business in Europe), TAL Manufacturing Solutions Limited and Tata Power Strategic Engineering Division. Most of these companies also participated in the Aero India 2017 exhibition held this February.
The participating companies of the Tata group offer end-to-end design to manufacture solutions. TAML manufactures various composite parts for aerospace applications, structural components, engine components, personal and vehicle armor. In fact, it’s the first company in India to be certified in composite manufacturing, supplying personal armor products to the Ministry of Defense, Govt. of India for the Indian defense forces.
Tata Steel supplies high-integrity alloys to major commercial and military aerospace programs around the world. Key end users include Airbus and Boeing (NYSE:BA).
by Sohrab Darabshaw