Monday, May 17, 2010

A HUGE $30 bn oppertunity...means Rs 1,35,000 cr business..........

DEFENCE EQUIPMENT - Rise in outsourcing catalyses setting up of aerospace SEZs..

As global aerospace and defence firms step up outsourcing to India to meet local commitments and cut costs, the country will see at least eight special economic zones (SEZs) dedicated to aerospace come up over the next five years.

India received the largest number of foreign investments in aerospace research and de- velopment in 2000-08, audit firm PricewaterhouseCoopers said in an April report, without quantifying the amount. India also got the second highest number of investments in aero- space manufacturing, after Chi- na.
But the biggest growth yet for the country's aerospace sector is to come from the offset clause in India's defence pro- curement procedure. Foreign arms makers have to source from local vendors at least 30% of the value of contracts won from India's military on deals of Rs300 crore or more.
India is expected to spend $100 billion (around Rs4.5 tril- lion) on buying fighter planes and helicopters from foreign firms over the next decade.
About one-third of this will be spent on sourcing equipment from Indian firms.
In just the past 18 months, around $2 billion worth of off- set contracts have been award- ed to local firms. These will be executed over the next decade.
In addition to this, India's own growth in civil aviation and the government's efforts to modernize airports will fuel the need for repair and mainte- nance units and local develop- ment of aircraft.
Despite a booming market for military and passenger air- craft, India's aerospace indus- try is still nascent. So far, the country has to its credit only a home-grown helicopter, a fighter jet and a trainer, and a two-seater passenger aircraft. It has set an ambitious task to build a 70-seater regional air- craft to compete with firms such as ATR, but its efforts to build a 14-seater passenger air- craft have been hit by delays.
The offset clause could help bridge the technology gaps.
Industry experts caution that dedicated aerospace zones re- quire large capital and long- term commitments by compa- nies, so unless an ecosystem is built the ventures could fail. As SEZs offer tax and other incen- tives to units within them in return for generating local jobs, experts fear the enclaves could turn into mere haunts for real estate and infrastructure devel- opers.
Aravind Melligeri, co-found- er of Quality Engineering and Software Technologies Pvt.
Ltd, or QUEST, said firms look- ing at aerospace SEZs as real estate plays will find the going tough.
“Global aerospace compa- nies look at lower costs next year than this year. So you need to have the right infrastructure and ecosystem to do that year after year,“ he said.
QUEST set up India's first aerospace SEZ in Belgaum, Karnataka. It began operations in November.
“For automobile compo- nents, if there is an issue you can rectify it on road; the loss is not much. But in aerospace, one failure can be deadly,“ said Ravinder Reddy, chairman of MTAR Technologies Pvt. Ltd.
“It will be very expensive for anyone to invest and main- tain.“
The Hyderabad-based de- fence equipment maker is set- ting up an aerospace SEZ in the city along with the state gov- ernment and as part of a con- sortium of around 50 other small firms. MTAR will also set up a unit in Lepakshi Group's aerospace park in Anantapur, Andhra Pradesh.
Lepakshi's managing direc- tor S. Balaji said the challenge in setting up an SEZ lies in bringing on one platform all the government agencies involved.
The other challenge lies in getting land.
“That problem is there every- where in the country,“ said an official at Tamil Nadu Indus- trial Development Corp. Ltd.
The state is planning two aerospace SEZs, including one in Perambalur.
The official, who didn't want to be named, said the state is inviting consultants this month to help develop a masterplan for aerospace SEZs. He didn't give more details.
In addition to these, the Kar- nataka government is setting up a 250 acre SEZ in Devana- halli near the new airport in Bangalore; the operator of Hy- derabad's new airport, GMR Hyderabad International Air- port Ltd, is setting up a 250 acre aerospace SEZ; and Maharashtra is building a dedi- cated hub in Nagpur.
Some say that even with the huge potential for foreign in- vestments in the sector, not all of the aerospace SEZs may sur- vive.
“In this competitive world, those who are fast enough, they will survive. Those who are slow, they have to close down,“ said R.C. Sinha, vice-chairman and managing director of Maharashtra Airport Develop- ment Co. Ltd, which is setting up the Nagpur enclave.

My Commets:

As per the article India will be investing $100 bn in next decade and out of that 30% should come from local the math is India will need 8 areospace SEZ in next  decade.....
so if India is to invest $100 bn in next 10 years then the contract of $30 bn will go to local vendors....that means an Rs.1,35,000 cr oppertunity........
India is going to be the next growth driver of world in next decade.
Well, due to Greek crisis and euoropean countries crisis there can be a set back in our market  as well and we can go below 16k as well but in the end we should do well as money flows where the growth is .......


  1. Rajeev, hope you are enjoying vacation out there. I recall few months back you mentioned to write about stock in animation/vfx sectore, I am not sure if you are tracking any stock in that area but if you do, please share it on board. thanks you.

  2. Rajiv bhai
    someone say very boldly nifty come near 4000 level (for gap filling which make during election result and sensex and nifty in
    upper circuit)
    your view please in worst case where you see nifty or sensex