indian defense & aerospace industry overview and ... · pdf fileindian defense &...

© Mahindra Satyam 2009

Dr. Prem ChandNew Delhi, 08 Sep 10

Indian Defense & Aerospace Industry Overview and Opportunities:

Presentation to Canadian Defence & Security Mission

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Agenda for presentation

• Indian Defense market overview

• Areas of Interest

• Emerging Strengths & Capabilities

• Ecosystem & Collaboration Opportunities

in Developing Core Competencies

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India – The Perfect Storm

Indian Defense budget increased exponentially in last few years with a view to modernize Indian Defense Forces.

FY 2009-10 Defense Budget increased by about 34 %

With the opening of the Indian defense segment for Private partnership a large opportunity has arisen to be explored.

• Focus on Modernizing Indian Defense Forces• Increase Public Private partnership for rapid growth• Make Indian Defense industry self reliant• Target to produce 70% of defense requirements indigenously• Relaxation in Custom Duties• Promoting FDI’s and Streamline Procurement procedures• More formalized and strategic Offset Policy

Government InitiativesBudgets

The Organization

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11th Plan spending set to be over $32 BillionIndia Defence

US$ 22.4 Billion

US$ 32 Billion

2007 2013

Various Capital Procurements Planned for all services are set to kick in during the 11th Plan period (2007-2012)This production pipeline will continue to grow during the course of the forecast period, affording opportunities for investment up until 2025

Current Equipment Focus is on Land Systems, by 2012 the focus will shift to Air Force Modernisation

Defence Market : Comparative Spending By Force (India), 2007-2013

Note: All Figures Are Rounded, Base Year 2007. Source: Frost & Sullivan

6.2

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2008 2009 2010 2011 2012

Year

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ence

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Land ForcesNaval ForcesAir Forces

5

© Mahindra Satyam 2009 * Frost & Sullivan Report

India Defense Spend $32-36Bn*

Defense Aerospace$6.7Bn in 2007; $13.8Bn in 2013*

India will be 6th Largest Defense Spender worldwide by 2016

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Indian Defence Market will be worth $36 bn in 2013

* Frost & Sullivan Report

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MRO and Export market will kick in during forecast period

* Frost & Sullivan Report

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India Looking for Synergistic Excellence in Defense Industry

•Components and Products •Tool Design and fabrication •Behavior and Failure Analysis •Engineering Software Solutions

•Aircraft D&D•Spacecraft D&D•Airborne systems D&D•Aerodynamics & CFD•Composite structures D&D•Manufacturing technologies•Aviation operations R&D•Static, dynamic, thermal, acoustic FEA

•System Integration •C3I•End to end Security•Communication Systems•Training & Simulation

IT & ITESCompositesAerospace ,Defense, Space Engineering Services

Electronic SystemsAeronautics SpaceInformation Systems

Viable Business Partnerships Across The Value Chain

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Current & Future Areas of Interest

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Current Areas of Interest

Precision Technologies Space Technologies Surveillance Technologies Terrain and Weather Negotiating

Technologies Night Fighting Capabilities C4ISR Improvement EW Capabilities Metallurgy / Composite Materials / Smart

Structures Simulators / Instrumentation of ranges Special Operations Equipment &

Weapons Missile Defence Systems

Source: CII

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Current Areas of Interest Contd…

Security Related Equipment Cyber Security / Biometrics / Security algorithms

NBC Related Technologies Soldier systems Technologies Naval high energy resistant materials and submarine rescue kits Air force War fighter protection and performance enhancement Detection of IEDs, Thermobaric warheads, Advanced Explosive Reactive

Armor Demonstration and assessment of Micro-aerial and Unmanned Ground

Vehicle Technology (MAV & UGV) Aeronautics and aerospace including hypersonic flight control system Supply of radar and EW systems for LCA Missile Defense including modeling & simulation Hazardous Electromagnetic Radiation to Ordnance (HERO)

Source: CII

12


Upgrades for Enhanced Capability and Extended Life

Weapon systems upgradation likely to cost over US $6 Bn.Key programmes include: T-72 MBT 133 mm M-46 Medium Gun L-70 AD Gun Schilka (SP) AD Gun BMP-2 ICV Alouette-II/III Helicopters Sea Harrier IL-38 MRASea King and Kamov Anti-

Submarine Helicopters Fire Control Radars, 877 EKM Submarines MIG-21, MIG-27 and Jaguar Aircraft.

Source: CII

13


Defence Manufacturing Value Chains Options

Technology Provider –Foreign Prime

Installation Service Provider

Maintenance Service Provider

Co – ProductionSKD / CKD / Component

Import Route – Buy / Buy & Make

Technology Provider –DRDO + Indian Prime +

Foreign subsystems/Foreign Technology Partners

Domestic Prime Contractor (Overall responsibility)

Prime Contractor (Overall responsibility)

Domestic Route

Foreign Prime

Sub-Contractor (Design)

Sub-Contractor (Production)

Prototype

Serial Production

Systems & Engineering Role

Upgrade

BU

YM

AKE

Upgrade

& M

AKE

Technology R&D

Design & Development/Integration

Manufacturing And Software Development

FactoryAcceptancetests

Documentation/Training

Site Installation/Integration

SiteAcceptanceTests

Warranty/Post WarrantyServices

Upgrades

Source: CIITata Power

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Ecosystem & Collaboration Opportunitiesin

Developing Core Competencies in Defense

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moving from SERVICES

HUB

R&D, DESIGN AND

INNOVATION HUB

Opportunity in India

India aspires to be a catalyst to

enable thisDefense

AerospaceHome Land

Securityin sectors of

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Research & Development drivers in India

Strong R&D Eco-System• Universities (IISc ; IIT )• Government Labs (DRDO ; NAL)

Cost Structure• PhD grant for 1 Year is significantly lower than In US• Lower cost for industry support

Building additional competencies• Grow further competencies in India to enable further

development.

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IP could be in the areas of

IP in Process

IP in Best Practices

IP in Content

IP in Products

Eg. automated innovative delivery models

Eg. Industry best practices, Technology Architecture

Eg. composite applications, system utilities etc

Eg. System or application for specific industry segments/ Business Process

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Potential Areas of collaboration: Products

• UAV’s• Low cost composites• Structural Health Monitoring• Fly-by-wire• Mechanical systems

Aeronautics

• Integrated Modular Avionics• Low Cost Avionics - Open architecture• Synthetic vision

Avionics

• Net Centric Operations: Modular Platforms• GIS – Telematics• Image processing• Video analytics

Security

• Hybrid Technologies• Smart Grid related.• Energy Management

Alternate Energy

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Potential Areas of collaboration: Process

• Knowledge based Engineering• MDO• Digital Manufacturing / Design for Manufacturing

Design

• RFID• Technical Publications• “As maintained” solutions

Support

• Integrated environments (SOA Based)• Integrated Digital Aircraft platformIT

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Ecosystem & Conducive Environment

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Factors That Foster A Conducive Defense Industry

Technological One of the most advanced defense research base amongst developing countriesStrong Information Technology industryWorld class engineering industry emerging

PoliticalPhased liberalization from 2002Implementation of Kelkar reportDrive to become a global economic power with commensurate military might

EconomicOne of the fastest growing economies with ~8.5% growth since 2002Defense budget expected to grow by 7% and remain at ~2.5% to 3% of GDP

LegalThe Government of India has gradually opened up direct foreign investment since 2002Offset obligationsFair legal system

EnvironmentalThe Indian Aerospace and Defense is the second largest employer in IndiaEmerging Tier structure will see both Public and Private sector companies

SocialAvailability of cheap and highly skilled labor force of designers and engineersSoftware companies and private sector companies bidding for electronic warfare projects

Source: Frost & Sullivan

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Accelerators & Gaps in Indian Defense market

ACCELERATORS GAPS GETTING FILLEDEmerging Markets in Civil & Military Aerospace

Eco-systems: Industry, Government, Universities, R&D Labs working together

Government regulations through the Offset Policy

Delays in Government decisions and spending

Share Business Risks Indian Partners understanding & patience of Risks involved

Engineering & Technical Talent base Capability & Maturity to deliver Complete Solutions

Cost advantage; Process standardization

Defense Supply Chain & Infrastructure: Material to Processed parts & Assemblies

Incubate New Technologies Full scale production facility

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AwarenessCreation

Policy Advocacy

OffsetFacilitation

DefenceTechnical

Assessment &Advisory

DefenceAcquisition

ManagementCourse

DefencePublications

CIIdefence.com

RFI Facilitation

Support & Facilitation by Industry Bodies

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Alignment

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• Aerospace & Defense business to be $ 40 billion in next 10 years• Outsourcing: $ 5 billion ( Booz Allen Hamilton report)

• Offset opportunities: $ 35 billion (CII-PwC report)

• Revenues from MRO: $ 2 billion in the next 10 years ( PwC report)

• Target Passenger to Freighter conversion business• Defense Spending : $ 120 billion over next 10 yrs ( PwC report)

• Private-Public Participation in the Defense Sector gaining momentum

Indian A&D in next 10 years (120-160Bn)

Outsourcing (5 Bn) Offsets (35 Bn)

Mfg Engg services

• Here the opportunities will be in ESO (Engg Services Outsourcing)

• Contribution from Mfg in this segment will be minimum

Mfg Engg. services

• Large opportunities from Mfg support in this segment

• Little contribution from ES

Defense (120 Bn)

Design & Build Entire System

We are here

OUTSOURCING & INDIAN A&D SCENARIOSAlignment with Market Momentum

Indian Aerospace & Defence Market: A high growth area

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Maturity Roadmap

• Business across 3 Opportunity baskets• Outsourcing, Offset & Defense

• Graduating progressively from Services at the Outsourcing level to Platform integration at the Defense level

PlatformIntegration

System Integration

Sub system integration

Component manufactureServices

Indian A&D in next 10 years (120-160Bn)

Outsourcing Offsets Defense

Path of Knowledge & Maturity Growth

Now 12-24m 24-48m

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mahindrasatyam.net

Safe Harbor

This document contains forward-looking statements within the meaning of section 27A of Securities Act of 1933, as amended, andsection 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained herein are subject tocertain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-lookingstatements. Satyam undertakes no duty to update any forward-looking statements. For a discussion of the risks associated with ourbusiness, please see the discussions under the heading “Risk Factors” in our report on Form 6-K concerning the quarter endedSeptember 30, 2008, furnished to the Securities and Exchange Commission on 07 November, 2008, and the other reports filed withthe Securities and Exchange Commission from time to time. These filings are available at http://www.sec.gov

Thank you

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