Mahindra & Mahindra (M&M), India’s biggest sport-utility vehicle maker, plans to build unmanned coastal surveillance vessels as the nation boosts security along its coastline following the 2008 Mumbai terrorist attack.
The company’s newly formed joint venture with Israel’s Rafael Advanced Defense Systems will assemble the vessel at a facility in Pune, western India, “in a phased manner” after initially importing models from its partner, KA Hai, chief executive officer of Mahindra’s defense unit, said in an e-mail reply to Bloomberg questions. He didn’t give a timeframe.
“Unmanned patrol vessels will be needed in large numbers to protect from infiltration by terrorists, protect our offshore assets and patrol vital coastal assets such as nuclear plants,” Hai said April 18.
India created a specialised force and added interceptor boats to strengthen security along its about 7,500 kilometers (4,660 miles) of coastline after militants reached Mumbai in November 2008 through the west coast and killed 166 people in an attack that lasted almost three days. The government also encourages local private companies to build defense equipment to help pare the nation’s reliance on overseas suppliers.
“This is a good opportunity for Mahindra as India is now reducing its dependence on foreign companies for defense,” said Umesh Karne, a Mumbai-based analyst at Brics Securities. “It’s also a strategy to hedge against fluctuations in its main business.”
Rafael, which will hold a 26% stake in the Indian venture, currently builds Protector, a remotely controlled naval combat vessel. The business, to be operational by July, expects sales to reach $50 million in the first year, Hai said last month. It also plans to build artillery guns and other weapon systems.
Mahindra rose as much as 1% to R734 in Mumbai trading, and changed hands down 0.1% at R725.90 as of 10:22 am local time. The benchmark BSE India Sensitive Index gained 0.3%.
The company, based in Mumbai, got 61% of revenue from the automotive business in the quarter ended in December, according to data compiled by Bloomberg. Farm equipment contributed the balance.
Mahindra has also formed a venture with BAE Systems for armored vehicles and a partnership with Telephonics Corp for radars as it expects sales of about $500 million in 10 years for its defense unit.
India last year overtook China as the world’s largest arms importer, according to the Stockholm International Peace Research Institute. Locally made defense equipment now accounts for about 40% of total purchases, from 30% previously, defense minister AK Antony said March 29.
The world’s second-most populous country plans to raise defense spending by 13% to R1.93 lakh crore ($37 billion) in the year that began April 1.
Tata Motors, owner of Jaguar Land Rover, and truckmaker Ashok Leyland are also expanding military equipment business after India opened defense production to private players in 2001.