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Glossary
OEM Original Equipment ManufacturerJV J i V
CAGR Compound Annual Growth Rate
SEZ Special Economic ZoneJV Joint VentureCIS Commonwealth of Independent States MRO Maintenance Repair Overhaul
SEZ Special Economic Zone
HAL Hindustan Aeronautics Limited
NAL National Aerospace Laboratories R&T Research & TechnologyUSD United States DollarUAV Unmanned Aerial Vehicle
MDL Mazagon Dock Limited
BEL Bharat Electronics Limited
DGCA Directorate General of Civil AviationUAV Unmanned Aerial VehicleAS Aerospace StandardISO International Organization for StandardizationMoU Memorandum of Understanding
DGCA Directorate General of Civil Aviation
MSME Micro Small and Medium Enterprises
MoCA Ministry of Civil Aviation MoU Memorandum of Understanding
DRDODefence Research and Development Organization
MoD Ministry of Defence
MRMRMedium Range Maritime ReconnaissanceDPSU Defence Public Sector Unit
ISRO Indian Space Research Organization UTC United Technologies Corporation
MRMR Reconnaissance
MMRCA Medium Multi-Role Combat Aircraft
DG Director General
GE General ElectricFDI Foreign Direct InvestmentIP International Protection
VAT Value Added Tax
NCR National Capital Region
DAC Defence Acquisition Council
1© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
IP International Protection DAC Defence Acquisition Council
Glossary
RFI Request For InformationRFP Request For ProposalRFP Request For ProposalATGM Anti Tank Guided Missile BRD Base Repair DepotsTEC Technical Evaluation Committee DIPP Department of Industrial Policy and Promotion CAD Computer Aided Design CAM Computer Aided manufacturing CNC Computer Numerical ControlESD Electro Static Discharge gToT Transfer of TechnologyB2B Business to BusinessPBT Profit Before TaxPBT Profit Before TaxPAT Profit After TaxEBITDA Earnings Before Interest, Taxes, Depreciation and AmortizationNADCAP N ti l A d D f C t t A dit ti PNADCAP National Aerospace and Defense Contractors Accreditation ProgramDGAQA Directorate General of Aeronautical Quality Assurance NSIC National Small Industries Corporation
2© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
LRU Line Replaceable Units
Foreword
Over the years the Indian auto component players have strongly integrated themselves into the global automotive supply chainOver the years, the Indian auto component players have strongly integrated themselves into the global automotive supply chainprimarily through their established manufacturing processes and world-class quality. They have been the torchbearers of Indianauto industry’s success story and a case study for our frugal manufacturing skills. The auto component sector has been the faceof “Make in India” drive for more than a decade.
Indian defence and aerospace sector is fast emerging as the sunrise sector and will take the centre stage in government’s “Makein India” drive. The government’s push for indigenization in defence and growing interest from global commercial aerospaceplayers to source from Indian suppliers, have opened up multiple supply chain opportunities for Indian private players.
W t l f l ACMA b b t iti d t b th t iti i th t d t th i f t iWe strongly feel, ACMA members are best positioned to grab these opportunities in the sector due to their proven manufacturingcapabilities. The Indian auto component players have all the right ingredients in place to repeat the success story of automotivein aerospace & defence sector. This is the right time for the ACMA member companies to devise a clear strategy and come outwith an action plan for the sector.
In this context, KPMG had been appointed by ACMA to assist them in their endeavour towards diversification into aerospace &defence. Our efforts have received overwhelming support from the global aerospace & defence companies and have beensuccessful in positioning ACMA as the right partner for the global OEMs and Tier1s who are looking at sourcing from India.
We are glad to jointly release the Aerospace & Defence sector diversification report with KPMG. The report captures the sector’slandscape, opportunities, challenges and outlines the road map for the ACMA members who are aspiring to be a part of thesector. We hope you will find this document useful and informative in planning your next steps.
F. R. SinghviChairman
3© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
ChairmanAerospace, Defence & Railways, Committee, ACMA
Executive Summary
Government’s defence modernization push and “Make in India” drive have renewed thef & d f t1 focus on aerospace & defence sector1
Global aerospace majors have started focusing on India to source components for theirI di d l b l i t2
Indian companies are now looking at aerospace and defence sector as a long term
Indian and global requirements
3sustainable opportunity
ACMA members, with their proven global manufacturing capabilities make ideal candidates
3
4
ACMA members may focus on commercial aerospace supply chain through globalt hi d t k t i ti h t d d f
as supply chain partners in aerospace and defence
5
4
partnerships and take an opportunistic approach towards defence 5
ACMA should play a proactive role with central and state governments for policy reformsrelated to aerospace and defence manufacturing in India6
There are significant regulatory, commercial and financial risks associated with aerospaceand defence that ACMA members must be aware of before taking the plunge7
related to aerospace and defence manufacturing in India
4© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
and defence that ACMA members must be aware of, before taking the plunge
Contents
M k t O i C i l & D fMarket Overview – Commercial aerospace & Defence
Opportunity Landscape for ACMA Players – Aerospace & Defence
Key considerations by aerospace OEMs & Tier1s when evaluating suppliers
Automotive Vs Aerospace
Key considerations by aerospace OEMs & Tier1s when evaluating suppliers
Sector specific challenges
Key activities by ADR committee & Outcome
Road Map & challenges during the journey
y y
Broad policy measures: To support aerospace component manufacturing
C di f l I di lCase studies of select Indian players
Overview of key India based Joint ventures in the sector
5© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1. Market Overview(Commercial aerospace & Defence)
6© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Emerging Economies Set to Drive Future Growth
Today
28%of worldwide
GDP
69%of worldwide population (4 9 billion
39%of world
passenger
39%of world
fleet in serviceGDP (4.9 billion people) trips fleet-in-service
2032
40%67% 54% 51%40%
of worldwide GDPof worldwide population
(5.7 billion people)
54%of world
passenger trips
51%of world
fleet-in-service
Emerging economies (54 countries)g g ( )
All other countries (150 countries)
Emerging economies represents 50% of new aircraft demand over the next 20 years
7© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source: Airbus report, Global Market Forecast 2013-2032
Global fleet Size to grow at a CAGR of ~ 4% during 2015-2034
Single-aisle airplanes around Asia-pacific region will continue to dominate the world’s fleet
Region Wise Increase in aircraft deliveries during 2014-2034
2580 2660
38,050 New Aircraft Deliveries Globally during2015-2034
4356021600
100001500020000
[VALUE] [VALUE]
2580
05000
2520 5800
[VALUE]
740 6701620 38002520 5800
2014 2034Fleet Size
Source – Boeing Current Market Outlook 2015-2034Note- The figures includes both passenger and freight aircrafts
2014 2034Large Widebody Medium WidebodySmall Widebody Single Asile
Around 41% of the existing aircrafts will be replaced and 15% will be retained by 2034providing significant scope for new component manufacturing players. As per recentindustry estimates, India & other emerging markets would generate aircraft demand
i d USD illi i 208© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
estimated at USD 5 trillion in next 20 years
A significant pipeline of new models and production ramp up of existing models offers significant opportunitiesg pp
Product lifecycle
R&T R&D OE Manufacturing AftermarketVa
lue
Manufacturing
Product lifecycleV Manufacturing peak
R&D definitionExtended support
‘tail’R&D definition tail
approx. 15 approx. 30 approx. 50
Platforms: A350 XWB
B787 A380 B777 A320 B747 B737 MaxB777X
Years
A320 Neo
XWB
C SeriesC919 B747-8
B767A330
B737 Classics A300/A310
B757B717
Max
JSF Typhoon
B777X
A340A330Neo
Many aircraft models are either entering the manufacturing stage or undergoing a production ramp up. This would provide significant opportunitiesfor Indian companies to become part of the global supply chain
9© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
for Indian companies to become part of the global supply chain
Major aerospace global players and their position in the supply chain
Aircraft ownersCommercial airlines and
Freight carriers
Maintenance, Repair and OverhaulAircraft Leasors and/or
M t C iAircraft owners
OEMsEngine manufacturers Aircraft manufacturersNew build
only
Freight carriersTransDigm, AAR Corp, Heico, Aviation Technical Services,
Timco Aviation Services, StandardAero
Management Companies
Civil Aircraft and Major Component Manufacturers
Rolls-Royce, GE, P&W, CFMI, IAE, Honeywell
Boeing, Airbus, Bombardier, Embraer, Gulfstream, Cessna, Dassault
only
Tier 1Systems Integration
Engines/Actuators
Aero-structures
Wheels, brakes, and landing gear
Flight control
and avionics
Interiors
GKN, Spirit, Messier-Dowty, B tti M itt
Goodrich, SafranRock ell Esterline
Zodiac, AIM, Cobham DiehlAvio (now GE)
Supply chain management and tooling manufacturer
Tier 2 Sub-assembly manufacture Trac, Gardner, MB Aerospace, Shimtech,
Aernnova,Triumph,
Latecoere, Alenia Aernautica
Bugatti, Meggitt Rockwell, Esterline Cobham, DiehlAvio (now GE),Volvo (now GKN)
MTU, MHI, Eaton, Moog, Nexcelle,
AVIC Principal component manufacturers
Pattonair, Wesco, MB Aerospace
Tier 3 Make-to-print components Sub-component and parts manufacture
pMonogram, Panasonic, Parker, PFW,
Mitsubishi, Kidde, PPG, FujiHamilton Sundstrand,
Doncasters, Firth Rixson,
PCC
MB AerospaceBrookhouse
Tier 4 Materials and Raw materials suppliers, casting and foundry
Target area for ACMA Companies
10© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Materials and processes Manufacturers - Alcoa, Kaiser, Aubert & Duval. Distributors - Thyssenkrupp
Indian aerospace and defence sector stakeholders and their objectives
■ Domestic players
■ Public: DPSUs Ordnance■ Foreign players
■ Public: DPSUs, Ordnance Factories, DRDO, HAL, NAL, ISRO
■ Private : Tata, Mahindra, Samtel, L&T etc
■ Boeing, Airbus, Goodrich, Honeywell, UTC, Thales, Rolls Royce, GE, Dassault etc
■ Capture opportunities arising out of ■ Capture rapidly emerging market t itiincreased push for indigenization including
offsets and in domestic market
■ Technology acquisition and capability development
opportunities
■ Leverage domestic industry competencies
■ Preserve competitive advantageIndustry
de e op e
Stakeholders
User Government
■ Ministry of Defence■ Defence, paramilitary and police forces y
■ Ministry of Civil Aviation■ Defence, paramilitary and police forces
■ Civil aircraft operators/airlines
■ Private users ■ Development of competent domestic industry
■ Defence Forces■ Socio-economic benefits such as industrial
growth, employment generation, and export growth
■ Growth of civil aviation and development
■ Defence Forces
– Increase Forces capabilities; Rapid replenishment of depleting equipment
■ Civil aircraft operators/airlines
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■ Growth of civil aviation and development related infrastructure
p- Leverage the high growth in air travel
Currently presence of Indian private players is primarily limited to Tier-3 manufacturing, Engineering and R&D services domaing, g g
Aircraft and subsystem design
Avionics, critical components design
Simulation and testing services
Component design, IT solutions
Design Engineering and IT solutions
P l t i Ai ft i t iC t Castings, forgings
Power, electronic components, cables, wiring
Sheet metal components
Aircraft interior: seats, windows, upholstery
Component manufacture(Tier-3)
Avionics & flightComponent Hydraulic systems
Electrical systems
Avionics & flight system components
Component manufacture(Tier-2)
E i A i i & fli ht Wi & l diSubsystems Engine manufacture
Avionics & flight control systems
Wing & landing gear assembly
ymanufacture(Tier-1)
Full aircraft Aircraft testing Fuselage empenAircraft Full aircraft assembly
Aircraft testing and validation
Fuselage, empennage assembly
Aircraft assembly
Presence of private playersp p y
12© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Existing & upcoming Aerospace & Defence SEZs/parks across the country
Upcoming major manufacturing clusters - India• Air India MRO, Delhi
Air works Avionics repair • Maharashtra Airport• Air works Avionics repair shop at Gurgaon
• Proposal to develop Aerospace park & MRO hub at Hisar
• Maharashtra Airport Development Company (MADC) SEZ at Nagpur
• 50 Acres Air India MRO
New Delhi
at Hisar• NCR Region: Small
component manufacturing facilities
Nagpur
Gujarat• 3,500 Acre SEZ at Dholera• Adani Specialized A&D SEZ
at Mundra• MRO Facilities: Upcoming
• Aerospace SEZ at Adibatla• New defence SEZs & Clusters
planned at AP & Telangana
Belgaum
gp
Hyderabad
• MRO Facilities: Upcoming
Q t SEZ t B l (300
planned at AP & Telangana• DRDO & ISRO facilities
Bangalore
KochiChennai
• Quest SEZ at Belgaum (300 Acres)
• 1000 acres Aero park near BIAL• Several small medium & largeSeveral small, medium & large
aerospace manufacturers • 250 acres Cochin International Airport industry park for aerospace manufacturing D f k i P l kk d
• Aerospace & defence SEZ at Sriperumbudur
13© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Secondary research, KPMG analysis• Defence park in Palakkad
p
Global aerospace & defence majors and their activities in India (1/2)
S. No Company Country YearRevenue
& PAT Sales -
Defence Vs Activities in Indiap y y(USD bn) Commercial
1 B i USA 1916 87 5 35 65
Recently won Naval & Airforce helicopter orders
& &1 Boeing USA 1916 87, 5 35:65 R&D center in Bangalore & supplierrelationship with HAL, BEL, Dynamaticsand Tata
Sources over USD 400 million worth of
2 Airbus Group Europe 1969 79, 1.5 20:80
Sources over USD 400 million worth of components & services from India andplans to increase it to USD 2 billionStrong presence in civil aviation and g pparticipating key military programs
3 UTCAerospace USA 1975 63, 6 19:81
Manufactures commercial aerospacecomponents in India (Bangalore). R&D Aerospace p ( g )centre in Bangalore
4 Lockheed M ti USA 1995 45, 3 78:22
JV with Tata for mfg aero structuresParticipating in rocket launchers4 Martin USA 1995 45, 3 78:22 Participating in rocket launchers, missiles, UAVs & radars programs
5 General Dynamics USA 1899 31, 2.5 60:40 Won its first contract in India in 2011 for
HAL - Hawk jet Trainer aircrafts
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y jSource: SIPRI, media reports, company financials
Global aerospace & defence majors and their activities in India (2/2)
S. No Company Country Year Revenue & Sales -Defence Vs Activities in IndiaS. No Company Country Year PAT Defence Vs Commercial
Activities in India
6 BAE Systems UK 1999 28, 0.20 94:6 JV with HAL & participating in Indianartillery and howitzer programsy g
7 Northrop Grumman USA 1994 25, 2.0 82:18 MoU with Bharat Electronics Limited
(BEL) and Pipavav Shipyard
8 Raytheon USA 1922 24, 2 93:07Supplies radar systems for Indian P8I Aircraft & thermal imaging fire control system for T-72 tank upgrade
9 Finmeccanica Italy 1948 21, (-)0.6 50:50 Major defence deals like MRMR and Multi Role Helicoptersy ( ) Role Helicopters
10 Thales France 2000 19, 0.8 55:45
Supplies sensors and electronic systems for transportable radar systems order (IAF) d S b i (I di0 a es a ce 000 9, 0 8 55 5 (IAF) and Scorpene submarines (Indian Navy)
15© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source: SIPRI, media reports, company financials
Large number of Indian private players have entered the aerospace & defence supply chain (1/2) pp y ( )
Private Players in A&D Products/Services offered
Aequs (Civil aero) Precision Machining, sheet metal fabrication, assembly, special processing and forging for aero structures
Alpha Design Technologies (Defence)
Develops and manufactures radar systems, electronic warfare equipment, mobile ATCs, Test stations, microwave components and related software development
Astra Microwave Products Ltd (Defence)
Develops and manufactures sub systems for RF and microwave systems for defense, space and telecommunication industries
Avasarala Technologies Ltd (Defence)
Manufactures products such as heat pipes, wave guides and mechanisms for space sector
Bharat Forge
(Civil aero and defence)Supplier of airframe, structural and engine parts
Dynamatic Technologies
(Civil aero & defence) Design and build highly engineered products for defense and security applications
16© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Large number of Indian private players have entered the aerospace & defence supply chain (2/2) pp y ( )
Private Players in A&D Products/Services offered
Larsen & Toubro
(Defence)Control Systems, Servo drives, Embedded systems, Custom-built electronic products for aerospace & defence applications
Mahindra Aerospace
(Civil aero)Aircraft and sheet metal, surface treatment and assembly manufacturing capabilities
MKU (Defence) Manufacture ballistic protection products, night sight devices and platform protection for aircrafts, ships and land vehicles
Punj Lloyd (Defence) Defence land systems, aerospace, electronics and MRO
Sansera Aerospace
(Civil aero)Ready to fit aerospace precision machined parts, seating systems, Cargo systems, cargo system parts, lighting system parts, sensors and structures( )
Tata Advanced systems Limited (TASL) Aerospace and aerostructure components
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(Civil aero & defence)
Strategic collaborations & JVs by Indian private companies to foray and expand in aerospace & defence sector
Company Partnership Details/Investment Key clients
p p
Tata Sikorsky JV - Aero structure assemblies for S-92 helicopters; Investment : ~ INR 250 cr
Sikorsky and clients in US/Indian market
Tata Lockheed Martin
JV - Aero structures for C-130J aircrafts Investment: ~ 200 cr
Lockheed and its clients in US market
DynamaticsSpirit
Aerosystem, Boeing
MoU - Manufacture aero structure assemblies Boeing, Airbus, Bell HelicoptersBoeing p
AequsSAAB,
Magellan, S tf
JV - Aerospace surface treatment solutions and manufacturing aero structures
GE, Magellan Aerospace, Rolls Royce, Honeywell,
G d i h d E tSetforge and manufacturing aero structures Goodrich and Eaton
Mahindra Aerospace
Gipps Aero, Aerostaff
Acquisition - Aero structure components to global aerospace GE (Aerostructures) Aerospace Australia Expects USD 300 mn in revenue in 3-4 years
Bharat Forge Safran MoU - Forged and machined components Expects to generate USD 100 mn in 4 5 years
Safran affiliates and clients
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Expects to generate USD 100 mn in 4-5 years clients
2a Opportunity landscape for ACMA2a. Opportunity landscape for ACMA players
(Aerospace - Commercial)(Aerospace - Commercial)
19© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Current Indian aerospace landscape & growing opportunities
Aerospace and defence is one of the focus sectors underpcentral govt’s “Make in India” initiative
Following the state of Karnataka, the state governments ofAP Telangana Tamil Nadu Punjab Maharashtra MP &
Increasing focus by the government
AP, Telangana, Tamil Nadu, Punjab, Maharashtra, MP &Gujarat are coming out with similar aerospace and defencepolicies
Global majors such as UTC, Sirkosky, Lockheed Martin,Rolls Royce Moog etc have set up manufacturing facilitiesInvestments by global Rolls Royce, Moog etc have set up manufacturing facilitiesand developing the supply chain in India for their globalrequirements
y gOEMs and Tier 1 players in India
& fAerospace & defence majors such as Airbus, Boeing, BellHelicopters, Sirkosky, GKN, Rolls Royce etc. have significantplans to increase their sourcing volume from India
India gradually being seen as a favourable
sourcing base
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Commercial Aerospace – Emerging opportunity for auto component playersplayers
Global aerospace OEMs and Tier 1s are increasingly looking at India to source for their global aircraft programsglobal aircraft programs
Risk mitigation• OEMs and Tier1s source more than 70% of their systems from US &
European suppliersRisk mitigation of supply chain
p pp• The system integrators and Tier1s are keen to de-risk and diversify by
developing their suppliers in Asian regions (Especially India and China)
Driving cost effectiveness in
• India is perceived globally as a low cost yet high quality base for manufacturing productseffectiveness in
the supply chain
manufacturing products • Global OEMs and Tier1s are increasingly looking at India to drive down
costs
Offsets • Offset opportunities arise from commercial as well as military aircraft
purchases by the government(Defence &
Commercial)
purchases by the government• Defence offsets can be discharged both by defence and commercial
aerospace sourcing
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Aerospace OEMs want to focus more on system integration and hence actively looking for credible partners to build the sub assemblies y g p
TodayPast The “New Aggregators”
L l
Platform Assembly Aggregators
like Airbus, System Integrators
Large-scale Integration
Value-added Parts
TIER 1RSP*
Boeing etc.
Make-to-print Parts and Assemblies
and Assemblies
Positioning of Indian Suppliers
Positioning of Indian Suppliers
Raw Materials
Suppliers
1.Fewer, but still many direct partners2 Limited role for
1.Many direct partners2.No real role for “integrators”3 Design to print of parts and
1. More of Large direct risk sharing partners • Strong ties • Sharing capital expenditure2.Limited role for
“integrators”3.Design to print of parts and sub-assemblies
Sharing capital expenditure, development costs and risk with aggregators
2.A real global extended enterprise3.Extensive role for “integrators”
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g* Risk Sharing Partners
Opportunity for ACMA members – Select facts
Airbus is planning to increase its cumulative sourcing from India to USD 2 bn by 2020. 85% of thi ill b i l
a.this will be commercial aerospace
Airbus is planning to add new suppliers from India this year and looking at developing a supplier base to support its recent win with Indian Airforce for supplying transport aircrafts
b.supplier base to support its recent win with Indian Airforce for supplying transport aircrafts
Boeing is looking at fulfilling their offset obligations (more than USD 1 bn) through commercial aerospace sourcing
c.aerospace sourcing
Bell Helicopters has recently signed an order with Dynamatics for supplying major aero structures for its civil helicopters and keen to repeat this success with other capable players
d.structures for its civil helicopters and keen to repeat this success with other capable players
UTC Aerospace is looking at increasing their supplier base from India for their global programs
e.programs
GKN Aerospace is planning to increase its sourcing from the low cost countries to USD 450 mn from 150 mn by 2019
f.
mn from 150 mn by 2019
Other tier1 suppliers of Boeing & Airbus are actively evaluating alternate sourcing destinations such as India for their global supply chain
g.
23© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
g pp y
2b. Opportunity landscape for ACMA2b. Opportunity landscape for ACMA players (Defence)
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India will witness a significant spend across Army, Navy and Airforce to modernize its Soviet era equipments (1/2)q p ( )
Capital Outlay split under Indian Navy, 2014-15
1%7%4%
46%
Capital Outlay split under Air force, 2014-15
1% 3%
14% 0%
18%53%
7%
49%
46%
4%53%
Land Construction
1%ConstructionAircraft & Aero enginesH d M di V hi l
Capital Outlay split under Indian Army, 2014-15
Aircraft & Aero engines Heavy and Medium VehiclesOther Equipment Joint staffNaval fleet Naval Dockyard
Heavy and Medium VehiclesOther Equipment
y
Other equipments includes avionics, missileguiding systems radars precision weapons
1%
17% 8%
1% 1%
guiding systems, radars, precision weapons,simulators, electronic warfare, control systemsthat supports these aircrafts, high technologyweapons, artillery systems, unmanned vehicles, advancedsystems and munitions other electronics systems training
11%61%
systems and munitions, other electronics systems, trainingship, polar and hydrographic survey vessel etc.Land Construction
Aircraft & Aero engines Heavy and Medium VehiclesOther Equipment Rolling Stock
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Rashtriya Rifles
India will witness a significant spend across Army, Navy and Airforce to modernize its Soviet era equipments (2/2)q p
Aerospace- Market Potential Aerospace and naval systems domain presents a huge market opportunity with dual market potential i e defence and commercial
Major Contracts
Rafale Fighter JetC
Naval - Market Potential
L d S t M k t P t ti l
opportunity with dual market potential i.e. defence and commercial
Avro Replacement ProgramMajor Contracts
Submarines (Project-75I) Major Contracts Future Infantry Soldier As a
Land Systems - Market Potential
Pilatus Basic Trainer Aircraft
Light Utility Helicopter (LUH)
Indigenous Aircraft Carrier (INS-Vishal)
Future-Infantry Soldier As a System Program
Future Infantry Combat Vehicle
Sukhoi Fighter JetMulti Role Frigates(Project 17A)
y
M777 Ultra Light Howitzers
Tejas- Light Combat Aircraft
Kamov helicopters
Landing Platform Docks
Corvettes (Warships)
Light Armored Multipurpose Vehicle
(Project 28A) Thermal imaging sights for T-72 tanksUSD 30 Bn +
USD 22 Bn +
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USD 16 Bn +
Current Market Players in Defence: DPSUs - The dominant force
Hi d t A ti Ltd (HAL) I di ’ l t i t t h i bl f b ildi
Aircrafts and Aerospace systemsAircrafts and Aerospace systems
Hindustan Aeronautics Ltd (HAL) – India’s only aerospace system integrator who is capable of building fixed wing and rotary systems for the Indian defence forces
Bharat Electronics Ltd (BEL) - India’s leading defence electronics manufacturer supplying critical ( ) g pp y gsystems to Indian aircraft and missile programs
Bharat Dynamics Ltd (BDL) - Leading manufacturer of missile systems for our defence forces. DRDO designs and develops these missiles. MIDHANI - Manufacturing aerospace & missile grade materials
Naval SystemsNaval Systems
Indian defence shipbuilding sector is dominated by 5 Govt shipyards each specializing in certain type of naval vessels
Goa ship yard – Patrol vessels, interceptors | Cochin shipyard – Aircraft carriers| Mazagon Dock Ltd –Submarines, Destroyers | Hindustan shipyard - Cargo liners, barges | GRSE – Frigates, Corvettes
I di O d F B d (OFB) h d 41 f i I di f i d
Land SystemsLand Systems
Indian Ordnance Factory Boards (OFB) has around 41 factories across India manufacturing armoured vehicles, artillery systems, guns, ammunitions , chemicals and other support systems for the armed forces
Bharat Electronics Ltd (BEL) - India’s leading defence electronics manufacturer supplying critical
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systems to Indian aircraft and missile programs
Options for industry to participate in Indian defence sector & opportunities for ACMA members
Manufacture and supply of complete equipmentsIndian Production Bid directly to Ministry proposals coming under Buy
& Make India, Buy (India) & Make categories underthe Defence Procurement Procedure (DPP 2013)
Indian Production Agency (IPA)
(Buy & Make India & Make Categories) ( )g )
Sub-systems such as structural assemblies, engines,electrical, electronics & communication systems,
Systems supplier (Tier1) to system
electromechanical and hydraulics systemsintegrators (IPA)
Military grade materials, castings, forgings, smallstructural assemblies electronics parts wire harness
Tier 2/3 components li t Ti 1 & structural assemblies, electronics parts, wire harness
etc to the Tier 1 players or OEMssuppliers to Tier1s & system integrators
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Revenue procurement by MoDRevenue expenses present a large opportunity for Indian component players
Revenue Budget covers procurement of items and equipments to maintain and operate already sanctioned assets in the service
Misc. charges5%
Revenue works
9%
Breakup of Revenue Expenditure Stores and equipment expenditure vs Revenue expenditure
Pay & allowances
Transportation3%
9%
7794 96 108 116 117
allowances54%
Stores & eqpt29%
13 16 16 8 20 20
• 70 80% of the equipment costs are in maintenance and upkeep of the equipment It is an INR
Revenue Expenditure Stores and Equipment Expenditure Values in INR ‘000 Cr
• 70-80% of the equipment costs are in maintenance and upkeep of the equipment. It is an INR~ 20,000 Cr opportunity which is increasing at a CAGR of 9%
• 15-20% is spent on Airforce MRO activities covering sub assemblies, components, spare partsetc.
IAF’s BRD has an indigenization cell which encourages private players to develop andsupply the spare parts required for maintenance of the aircrafts in its fleet
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Source: IDSA, KPMG analysis
Defence – Challenges need to addressed for successful participation of ACMA members in “Make in India” for defence
Current purchase system makes it difficult for auto components players to actively participate in Indian defence programs*participate in Indian defence programs*
A wait & watch approach
Auto component SMEs should understand the defence sector and analyze the low hanging opportunities before committing large investmentsg g pp g g
ACMA ADR committee will be meeting the defence ministry officials to advocate right policy changes to enable the contribution of its members
While defence is definitely a lucrative sector to invest, government need to come out with ground level policy changes to encourage SMEs in the sector
The capabilities built around commercial aerospace sector can be leveraged to tap the opportunities in defence once the business environment improves
There are few bright spots in defence such as supplying spare parts & MRO services to the defence forces and these will be explored further
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* Please refer the challenges section
3. Automotive Vs Aerospace
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Auto companies to diversify into aerospace & defence sector, it becomes utmost important to realize the similarities and severities between the twop
Key parameters are similar in both but more demanding in aerospace & defenceKey parameters are similar in both but more demanding in aerospace & defenceAspect Aerospace & Defence Sector Automotive Sector
P d ti• Production volumes for most of the
components is comparatively lowAuto sector caters to much broader customer segment andProduction
quantitycomponents is comparatively low
• Most items would be manufactured using batch production techniques
broader customer segment and larger volumes
Selection Criteria
• Involves rigorous assessment by OEMs on various parameters with zero tolerance levels
Strict assessment by OEMs but number of parameters & tolerance limits areCriteria tolerance limits are comparatively less stringent
• Requires highly skilled resources High production volume can be Resources • High component varieties and low volume
demands high manpower requirementmanaged with a mix of skilled and semi skilled resources
M i l V d di d t i tl it d C ti l l d diMaterial Handling
Very demanding and strictly monitored Comparatively less demanding
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Auto companies to diversify into aerospace & defence sector, it becomes utmost important to realize the similarities and severities between the twop
Key parameters are similar in both but more demanding in aerospace & defenceKey parameters are similar in both but more demanding in aerospace & defenceAspect Aerospace & Defence Sector Automotive Sector
• One machine can be configured to • This might be difficult due to highl & t ti t i t
Product produce multiple parts due to low volumes
• More product varieties and
volumes & set up times constraints
• Product varieties are relatively lesser and standardized across p
specifications models in a platform
P b k• Long as it may take 4-5 years for a
li t t t kiComparatively shorter
Pay back period
new supplier to start making revenues after passing the assessments
Penalties and risk
Suppliers need to pay huge penalties in case of product failures
Penalties are comparatively less stringent
Globalized yet India centric due toSupply chain Complex, globalized supply chain
Globalized yet India centric due to large local demand & increased local sourcing by OEMs
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4. Key considerations by Aerospace OEMs & Tier1s while evaluating their suppliers
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Key considerations by global OEMs for selecting their suppliersNine core parameters that govern the supplier selection
Aerospace & Defence experience
Training and Human
Resource
IT System and Process
experience
Quality
Resource
Broad supplier Selection
Broad supplier Selection
Broad supplier Selection
Management Intent
and strong vision
Quality systems/
certifications
SelectionparametersSelection
parametersSelection
parameters
Efficient
vision
Efficient production processes Change
control system
PurchaseMaterialHandling Capability
Purchase & Vendor
Managementtechniques
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5. Sector specific challenges
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Risks/Challenges - Aerospace
Nascent stage of domestic production1
Lack of focus: Aerospace OEMs and Suppliers - Until recently, there was an absence of a focused sourcing strategy for India
a.
Attracting private aircraft manufacturers & Tier1s - Challenges still exist in attracting anchor units of global OEMs & Tier1s
b.focused sourcing strategy for India
Limited Indian players as large suppliers- Limited Indian players at the Tier 1 & 2 level c.
Delays in indigenous aircraft programs - Programs such as Regional Transport Aircraft development are yet to take shape
d.
Western domination in aerospace supply chain - Global sourcing volumes still dominated bya.
Global competition2
Western domination in aerospace supply chain Global sourcing volumes still dominated by clusters in Europe and North America
Assertive Middle East, China and other Asian Countries - Stiff competition for component b.
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level sourcing from low cost countries such as China, South Korea, Thailand and the Middle East
Risks/Challenges - Aerospace
High entry barriers and low initial volumes 3
Stringent Quality standards, Long realization times - New entrants may take 2-3 years to perfect production methods, achieve certifications and qualify the stringent qualification process
a.
Material unavailability, Dependence on Imports - Unavailability of Aerospace grade materials in India with a heavy dependence on imports
b.
Lack of trained manpower, High attrition rate - Lack of skilled manpower, skill development programs & demand driven attrition
c.
Production volume, Pay back period - Pay back period is long term with initial low production volume
d.
Ecosystem & Infrastructure - Nascent aerospace manufacturing ecosystem and supportinga.
Other challenges4
Ecosystem & Infrastructure Nascent aerospace manufacturing ecosystem and supporting infrastructure in the country
Material handling challenges, Lack of supporting facilities - Demanding process control b.
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and material handling procedures, Inadequate supporting facilities for testing, certification etc.
Risks/Challenges - Defence
Private sector at a disadvantage 1
Uncertainty around India’s procurement programs • Long delays and uncertainties in defence procurement programs
a.
g y p p g• Examples are India’s artillery procurement programs, Helicopter programs, Future Infantry
Combat Vehicle (FICV) program, Submarine acquisitions etc.
Lack of level playing field for Private players • Current FDI cap of 49% discourages global OEMs to share IP with Indian players
I di P i t t l k R&D d f t i bilit t ti i t t i t t
b.
• Indian Private sector lacks R&D and manufacturing capability to participate as system integrators
Technology intensive A&D f t i i hi hl t h l i t i i ll i OEM d Ti 1 l l
c.• A&D manufacturing is highly technology intensive especially in OEM and Tier 1 levels • Average R&D time of 8-10 required to develop products and compete globally
d.Domination by Indian Defence Public Sector Units (DSPUs)*
d.
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* Explained in the next slide
Risks/Challenges - Defence
Domination by DPSUs2
R&D and manufacturing infrastructure - Domination by DPSUs such as HAL, BEL, BDL and Shipyards, Ordinance Factory Board (OFB) and DRDO
a.
System development capabilities - Private players lack the system development capabilities to compete with DPSUs
b.
py , y ( )
to compete with DPSUs
Tax/Duty Structure • Structure benefits DPSUs rather than private players
c.
C t l I di C t ll d b DPSU ith ti i ti fd.
• Structure benefits DPSUs rather than private players • Govt. has recently taken few steps to address this issue
Control on Indigenous aerospace programs - Controlled by DPSUs with participation from private sector limited to components level
Challenges for private players working with DPSUsChallenges for private players working with DPSUs • L1 system of selection & Long pay back period • Limited order quantity & Uncertainty of orders
Delay in procurement programs
e.
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• Delay in procurement programs
Risks/Challenges - Defence
Regulatory challenges3
Incentives and supporting Infra - Delays in creating word class infrastructure and supporting incentives to promote manufacturing
a.
MSMEs - Lack of support for MSMEs in A&D sector b.
FDI cap of 49% - Discourages global OEMs and Tier 1s in setting up facilities in India c.
dExport restrictions, Practical hurdles in offset policy - Restrictions hurting Tier 1 and OEM Investments, Offset policy limitations holding back A&D investments
d.
Process hurdles - Sharing of IP and product development knowledge between the DPSUsa.
Lack of Coordination between DPSUs and Industry 4
Process hurdles Sharing of IP and product development knowledge between the DPSUs and the Private sector
Procurement process by DPSUs Discourages competent players from participatingb.
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Procurement process by DPSUs - Discourages competent players from participating
6. Roadmap & challenges during the journey
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Roadmap for the aerospace sector forayA five step approach to TransformationA five step approach to Transformation
Phase 3: Implementation
GlobalGlobal Aerospace
SupplierDiversification into Aerospace
2 – 4 years
4 – 6 years
Diversification into Aerospace
Stage 4: Certifications
Stage 5: Moving up the Value Chain3 – 12 Months
12 Months –2 years
2 4 years
Stage 2: Building the
Stage 3:Securing the initial order
Certifications & Expansion
Chain0 – 3 Months
3 – 12 Months
Stage 1: Taking the right step forward
Building the Infrastructure
forwardThe journey to evolve as a preferred partner for global aerospace players will be tough withchallenges. Indian auto component players have the required capabilities and need to adoptth i ht h t h th il t
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43
the right approach to reach the milestone
Way forward for commercial aerospaceTaking the right step forward – Stage 1Taking the right step forward Stage 1
Stage 1 (0- 3 Months)Pl it i htPlan it right
Understand your key
strengths & Preliminary interaction with Tier 1
Develop robust vision
d bj ti
Identify key product
segments tod core competencies
with Tier 1 and OEMs and objective segments to
focus on
forw
ard
ght s
tep
Map criticalIdentify key
focal Create Devise entry
ke th
e rig
Map critical gaps and ways to
address them
focal person(s) to spearhead sectorial initiatives
Create dedicated business vertical
Devise entry strategy and investment
plan
Tak initiatives
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Way forward for commercial aerospaceBuild partnerships & infrastructure – Stage 2Build partnerships & infrastructure Stage 2
Stage 2 ( 3 - 12 Months)Build the Infrastructure
Focus on Participate in
Build the Infrastructure
catering to global supply chain through focus products
Participate in aerospace events and
forums
Build a focused team for
aerospace
Identify anchor customers and build rapport
ure
p
Train core team on key Create
dedicatedProduction strategy to Initiate process ra
stru
ctu
yexpectations of
aerospace players
dedicated line/facility for
aerospace
gymanufacture in
house & outsource
pto purchase
right machines
right
infr
Establish process and
controls as perFocus on customer
Discuss with sourcing teams
of OEMs such as Airbus Boeingea
te th
e r
controls as per aerospace standards
customer requirements
Airbus, Boeing UTC etc. to sync with their India
plans
Cre
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Way forward for commercial aerospaceApprovals and Certifications – Stage 3Approvals and Certifications Stage 3
Stage 3 ( 12 Months – 2 Years)Win the initial orderWin the initial order
orde
r Identify & reach out to right customers Prepare facility Choose the
e in
itial
o customers based on identified
component t i
Conduct B2B meetings and plan site visits
Prepare facility for formal
assessment by customers
Choose the right
components to pilot
o w
in th
e types, sourcing needs etc
The component Conduct pilot
step
s to The component
should align the company’s
capabilities and involve simpler
Set up special process & material
sourcing tie ups
Conduct pilot trials and
reviews by the customer till
achieving first
Secure order or assurance from
customer
he ri
ght involve simpler
processes sourcing tie ups achieving first
right part
Prepare facility
Take
th Prepare facility for AS9100 and other quality audits
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Way forward for commercial aerospaceSecuring the first order and scaling up – Stage 4Securing the first order and scaling up Stage 4
Stage 4 ( 2 – 4 Years)Certification and ExpansionCertification and Expansion
Scale up
scal
e up
Get the required
certifications and other
Scale up facility and
processes to meet the
i d
Win confidence of the first
t
Discuss on other
opportunities ( t )
ns a
nd s and other
customer approvals
required volume and
quality
customer (components) with customer
tific
atio
n
Gradually add new Plan for
btai
n ce
rt Develop healthy
portfolio of components
Expand customer base
components and customers
without compromising
Plan for additional
approvals, audits, quality
requirements
Ob p p g
quality and reputation
requirements
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Way forward for commercial aerospaceMoving up the value chain – Stage 5Moving up the value chain Stage 5
Stage 5 ( 4 – 6 Years)Move up the value chainMove up the value chain
Develop clear vision and strategy to
move up fromBuild capability
by working ith t
Look for global players (JVs, A i iti ) t
Target Indian and other
global players h hmove up from
component to sub assembly manufacturer (Tier 2 level)
with customers to identify right
assemblies
Acquisition) to propel the
transformation
who have defence
manufacturing bases in Indiach
ain
(Tier 2 level)
he v
alue
Develop capability and
ove
up th capability and
approvals to supply sub
assemblies to k l b l
Mo key global
aircraft programs
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Way forward for DefenceBuild the capability and wait for the right opportunity and timeBuild the capability and wait for the right opportunity and time
Preparatory Stage ( 1 - 3 Years)Build Capability and Look for the right opportunities
Understand the D l t
Build Capability and Look for the right opportunities
time
Understand the sector, regulatory processes & pipeline opportunities;
Develop connects with key
stakeholders: DPSUs, Defence
Scout for low hanging opportunities with ahe
righ
t t
Build your complimentary capabilities from commercial aero
private sector OEMs, Indian business
groups bidding for programs
opportunities with a low risk factor
ait f
or th
ty a
nd w
capa
bilit
Look for any defence offset opportunities that can be catered
Empanel your company with
Defence HQ DPSUsApply for industrial license required for
Bui
ld c through investments
in commercial aerospace
Defence HQ, DPSUs to keep track of
opportunities identified defence
products
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Key Challenges during the journey (1/3)
Nascent supply chain & Lack of sectorial understanding
Choosing the right business segment
Long gestation time & B i f t k h ld
Plan (Stage 1)
g guncertainties Buy in from stakeholders
Skepticism amongst OEMs and Reluctance of global suppliers to Tier 1 players on Indian suppliers
g pppartner with Indian component
playersBuilding the Infra (Stage 2)
Investment in machines & infra without order security
Talent identification and training on global processes
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g p
Key Challenges during the journey (2/3)
Adapting to high quality expectations consistently
Preparing and training the team on aerospace manufacturing approach
Winning the
Successfully clearing pilot trials, getting Identifying right components to
initial order (Stage 3)
y g p , g gthe OEM approvals and securing order
Identifying right components to start with
Adhering to strict processes Strict audit process by certifying Adhering to strict processes St ct aud t p ocess by ce t y gagencies Certification &
Scaling Up (Stage 4)
Adhering to timelines & choosing the right component to scale up
Building scalable production, material handling &
lit t
( g )
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quality set ups
Key Challenges during the journey (3/3)
Maintaining traceability & Production setup with higher tolerances, higher product variety, low
Handling logistics & supply chain
material handling variety, volume etc.
Handling different grades ofProduction Handling logistics & supply chain issues pertaining to special processes
Handling different grades of aerospace raw materials & inventory
Production (Stage 4)
Retain & train talent; Strict adherence to additional audits from OEMs & Tier1s
To Build capability to position as a sub assembly player (Tier 2)
Competition from established players in Europe & North America
Moving up the value chain
(Stage 5)Uncertainties & delays in Indian
defence programsDeveloping R&D & technical
capability( g ) p g capability
Cautious approach from global Managing supply chain ; Export
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pp gplayers
g g pp y ; prestrictions, ITAR & IP controls
7. Key activities by ADR committee & Outcome
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Activities & Outcome (1/2)
Reached out to ACMA 38 companies Exercise to collate the A capabilityACMA
members to identify Interested companies
38 companies had expressed
interestcapability
details of the 38 companies
A capability database of 38
companies
Interactions with Profiles of I t ti ith Efforts to
select OEMs & Tier 1s*
ACMA members
shared
Interactions with Trade organizations
& embassies**
Facilitate global
partnerships
Airbus has shortlisted 14 companies for visit & assessment
GKN, UTC, Rolls Royce are in the process of shortlisting & selectionselection
* Airbus UTC GKN aerospace Rolls Royce Sirkosky Lockheed Martin Bell Helicopters Boeing
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** Business France (French Embassy), UKTI, US embassy commercial servicesAirbus, UTC, GKN aerospace, Rolls Royce, Sirkosky, Lockheed Martin, Bell Helicopters, Boeing
Activities & Outcome (2/2)Aircraft OEMs & ACMA – Partnering to build the Indian aerospace supply chainAircraft OEMs & ACMA Partnering to build the Indian aerospace supply chain
OEMs & Tier1s want to develop new suppliers from the current Indian manufacturing and services supply base to support their global aerospace suppliermanufacturing and services supply base to support their global aerospace supplier chain A Collaborative Model
ACMAPotential Companies shortlisted by the OEMs & Tier1s and other interested players
Building a robust s ppl chain in Indiasupply chain in India
with ACMA members as the preferred partners
Aerospace OEMs & Trade
Organizations Airbus, Boeing, GKN, UTC etc.Business France, IFCCI, UKTI, ADS US trade bodies etc Tier1sOrganizations
The planned approach is to jointly work with the OEMs & Tier1s to establish a joint task
, g, ,ADS, US trade bodies etc..
e p a ed app oac s to jo t y o t t e O s & e s to estab s a jo t tasforce with Trade organizations of key supply bases in USA & EuropeThe Trade organizations will work with potential ACMA companies to identify right Joint Venture partners and investment targets with support of the OEMs
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Venture partners and investment targets with support of the OEMs
Going Forward
Interaction with other stakeholders as and when required1 q
ACMA’s 2nd A&D conference in 2016 -172
Submit a note to defence minister (expectations to support “Make in India” for defence &aerospace)3 aerospace)
Arrange meetings with senior officials on Ministry of Defence & Ministry of Civil Aviation4
Interaction with Airforce HQ officials to explore opportunities in supplying spare parts& MRO5 & MRO
Study visits for ACMA members to the Indian facilities of global and Indian aerospaceplayers6 players
Coordinate with Airbus and organize visits to aerospace clusters in France & UK7
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8. Broad policy measures p yrequired to support aerospace component manufacturingp g
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Key policy measures to boost component manufacturing eco system (1/3)
Developing aerospace clusters1
(1/3)
Developing aerospace
Clusters unlocks value through synergies Need to develop 3 to 4
Role of central
Govt. needs to work in tandem with States and global OEMs for aerospace
clusters synergies. Need to develop 3 to 4 focused clusters for aero structures, landing gear, engine components etc. to attract global investments
central government
gconceptualizing and developing such clusters
Plug & Play infra2
Common Infra
Govt. should develop common infra to support component
f i l i h
Plug & Play Infra
Focus should be to create plug and play infra where power, water, water
g y
manufacturing players in the sector
ytreatment, constructed factory, office and housing premises/complexes would be present
Includes special process and testing facilities, warehouse for inventory storage, training centers etc
Provision of hassle free land banks for future expansion should be considered/provided
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etc considered/provided
Key policy measures to boost component manufacturing eco system(2/3)
Fostering skill development
(2/3)
3
Structured Govt. with the support of global Creation of cross
A cross functional team comprising of industry bodies such as ACMA,
g p
skill development program
aerospace & defecne players should spearhead structured skill development program for SMEs
functional skill development t
OEMs, NSIC, Ministry of MSME, MoD, MoCA should be formed to create an action plan for developing aerospace skill developmentteams aerospace skill development centers across India
Government: Govt should consider according ‘Infrastructure’ status to the A&D industry and provide
Reduction & simplification of taxes4
Government: Tax Structure
Govt. should consider according Infrastructure status to the A&D industry and provide concessions/benefits in the form of tax incentives (indirect and direct tax) so as to augment domestic production
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Key policy measures to boost component manufacturing eco system (3/3)
Financial support
( )
5
SME Funding Govt. should encourage public and private banks and other financial institutions to provide funds for SMEs in aerospace manufacturing
SME funding is a challenging issue even for advanced aerospace ecosystems such as Toulouse aerospace cluster in France
Govt corpus combined with support from banks and financial institutions would make forGovt. corpus combined with support from banks and financial institutions would make for a healthier component eco system in India
Defence Offsets6
Joint Ventures Provide offset multipliers to defence OEMs and Tier 1s for commercial aerospace sourcing and investments through JVs by their suppliers in India Support Indian JV companies to produce defence components and systems for global pp p p p y gmarkets
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9 Case Study of select Indian9. Case-Study of select Indian players in the sector
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1) Aequs (earlier Quest Global) ) q ( )
About Aequs Key Financial InformationCompany Info 2006 as an offshoot of Quest
GlobalRebranded to form Aequs in 2014
■ Group Turnover FY14 – ~ INR 155 Crores■ Aerospace and Defense revenues – About 50%
comes from aerospace2014Head Quartered : Belgaum, India
Key Industriesserved
Automotive, Oil & Gas, Aerospace Key Partnerships and AlliancesPartner Details
Additional Info:
servedManufacturing Plants
Belgaum, Bangalore, Houston
Key Product Precision machined aero engines
Partner Details
Aerospace Processing India Pvt Ltd
API is a JV of Aequs and Magellan Aerospace for providing aerospace surface treatment solutions in IndiaKey Product
CategoriesPrecision machined aero engines and aero structure componentsAluminium machined parts for A 380 floor assembly
India Pvt Ltd surface treatment solutions in India
Aerostructures AssembliesIndia Pvt Ltd
JV between Aequs and SaaB AB of Sweden. Company specializes in build-to-print assemblies for
Steel machined parts for Boeing 777 and Boeing 767 landing gearTitanium machined parts for Boeing 777 wing
d a d bu d o p asse b es ocommercial and defense aircraft
SQuADForging India
JV between Aequs, Aubert &Duval SA and Setforge SocieteBoeing 777 wing
Key Customers Airbus, UTAS, Honeywell, Eaton Aerospace, GE, Magellan Aerospace, Rolls Royce
Forging India Pvt Ltd
Duval SA and Setforge Societe Nouvelle SAS for developing aerostructural parts, landing gear, and braking system components
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Source : Company Wesbite, Annual reports, KPMG Analysis
Aerospace, Rolls Royce
2) Astra Microwave Products Ltd.)
About Astra Microwave Products Ltd. Key Financial InformationCompany Info Head Quartered :Hyderabad,
IndiaFounded in 1991A division of Godrej & Boyce
■ Group Turnover FY15 – INR 644 Crores■ Aerospace and Defense revenues – ~ INR 580
CroresA division of Godrej & Boyce Limited
Key Industriesserved
Defense, Space, Telecom, Meteorology, Satcom, Security
Key ContractsAdditional Info:
served Meteorology, Satcom, Security
Manufacturing Plants
Medak, Rangareddy (Telangana)
Key Product Radar
AMPL won a major order from Israel-based ELTAsystems, the execution of which saw exports risesix-fold and revenue more than double in FY2014
Key Product Categories
RadarData and video telemetry transmitter systems Ground based and surveillance
Bagged offset related export order worth more thanINR 3500 million by the end of FY12
ReceiversCoherent frequency generatorsLow power microwave sub-systemssystems
Key Customers DRDL, DEAL, LRDE, HindustanAeronautics, ISRO, Defense Avionics Research Establishment
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o cs esea c s ab s eSource : Company Wesbite, Annual reports, KPMG Analysis
3) Bharat Forge) g
About Bharat Forge Key Financial InformationCompany Info Head Quartered : Pune , India
Established in 1961,Flagship company of the Kalyani Group
■ Group Turnover FY15 – INR 7,625 Crores■ Aerospace and Defense revenues –Expected to
reach USD 100 million in 5 yearsGroup.
Key Industriesserved
Automotive, Power, Oil & Gas, Locomotive, Marine, Aerospace, Construction & Mining
Key Partnerships and AlliancesPartner Details
Additional Info:
Construction & Mining
Manufacturing Plants
Pune, Baramati, Mundhwa
Key Product Wheel lever forging
Partner Details
Rafael advanced systems (JV)
Missile technology, remote weapon systems and advanced armour solutionsKey Product
CategoriesWheel lever forgingFan forgingMain leg forging
systems (JV) solutions
Elbit Systems, Israel (JV)
Advanced artillery and mortar systems to the Indian military
Key Customers DRDO, Indian Ordinance Factories, HAL, ISRO, L&T, Walchandagar
( )
SAAB (JV) Land and air defence systems
SafranForged and machined components for commercial aircraft applicationsSafran for commercial aircraft applications to Safran's global affiliates
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Source : Company Wesbite, Annual reports, KPMG Analysis
4) Dynamatic Technologies) y g
About Dynamatic Technologies Key Financial InformationCompany Info Head Quartered : Bangalore,
IndiaEntered Aerospace Market in 1995
■ Group Turnover FY15 – INR 1611 Crores■ Aerospace and Defense revenues – INR 261.7
Crores1995
Key Industriesserved
Aeronautic, Automotive, Hydraulic and Security applications
Key Partnerships and AlliancesPartner Details
Additional Info:
applications
Manufacturing Plants
Bangalore, Chennai, Nasik in India, Swindon, Bristol in UK,Erla in Germany
Partner Details
Spirit Aero MOU for the production of aero structures (Airbus A320, A330)
y
Key Product Categories
Airframe Structural assembliesPrecision Aerospace Components
Bluebird Aero System (Israel)
Technical collaboration for the assembly, marketing and manufacturing of Mini and Micro Tactical UAV
Key Customers Honeywell, Boeing, Airbus, GKNAerospace, Magellan Aerospace,GE Aviation, Lockheed Martin,A t W tl d DRDO HAL
(Israel)
Bell Helicopter
MoU to become sub-contractor for Bell 407
B i M U d M d l P h C t t tAugusta Westland, DRDO, HAL, Bell
Boeing MoU and a Model Purchase Contract to manufacture assemblies for CH-47F Chinook
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Source : Company Wesbite, Annual reports, KPMG Analysis
5) Godrej Aerospace
About Godrej Aerospace Key Financial InformationCompany Info Head Quartered :Mumbai, India
Founded in 1985A division of Godrej & Boyce Limited
■ Group Turnover FY15 – INR 9,324 Crores■ Aerospace and Defense revenues – Less than
10% of groupLimited
Key Industriesserved
Aerospace
Man fact ring M mbai
Key ContractsM d t d b ISRO t d i i
Additional Info:
Manufacturing Plants
Mumbai
Key Product Categories
Spacecraft components - made of exotic alloys
1 Mandated by ISRO to produce semi-cryogenicengines for its products
2 Supplied the Vikas engines for ISRO’s rocketsGSLV Mk IIICategories of exotic alloys
Adaptor assemblyAntennaSpace engines
GSLV Mk III
3 Supplier of BrahMos missile air‐frameassemblies in batches since 2009 till date
D l t l d lif l t fEngines tubing and accessoriesAir frame
Key Customers GE, ISRO, Brahmos, DRDO, B i Ai b R f l I di
4Development, supply and life cycle support ofMobile Autonomous Launchers (MAL) for theBrahMos missile
Contributed to Chandrayan 1 through itsBoeing, Airbus, Rafael, Indian defense forces
5 Contributed to Chandrayan-1 through itspartnership with ISRO
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Source : Company Wesbite, Annual reports, KPMG Analysis
6) Investment & Precision Castings Ltd (IPCL)) g ( )
About Investment & Precision Castings Ltd (IPCL)
Key Financial Information(IPCL)
Company Info Head Quartered : Bhavnagar, Gujarat, IndiaEstablished in 1975
■ Group Turnover FY15 – INR 74.1 Crores■ Aerospace and Defense revenues – About
3% of groupEstablished in 1975
Key Industriesserved
Automobile, Defence, Power Generation, Dairy & Food Processing, Earthmoving Machinery Air-conditioning
Key Highlights
Additional Info:
Earthmoving Machinery, Air-conditioning & Refrigeration, Printing, Textile Machinery, Atomic Energy
Manufacturing Nari Road, Bhavnagar, Gujarat, India
Accreditations & Certifications: ISO 9001:2008,ISO 14001:2004, EN 9100, TS/16949 : 2009,OHSAS 18001
Manufacturing Plants
Nari Road, Bhavnagar, Gujarat, India
Key Product Categories
Gimbal Box & Pedestal Unit for Multi Mode Radar for Light Combat g gAircraft "Tejas“Various components for Space Shuttle - GSLV D5Parts for radars & navigationalParts for radars & navigational instruments for aerospace
Key Customers
Honeywell, Boeing, L&T, HAL,RAFAEL MBDA ISRO
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Customers RAFAEL, MBDA, ISROSource : Company Wesbite, Annual reports, KPMG Analysis
7) Lakshmi Precision Screws Ltd.
About Lakshmi Precision Systems Ltd. Key Financial InformationCompany Info Head Quartered : Rohtak
,Haryana, IndiaEstablished in 1972
f
■ Group Turnover FY14 – INR 351.3 Crores■ Aerospace & Defence revenues : Not Available
Key Industriesserved
Wind Energy, Automotive, Defense, Electronic & Communication, Construction, Agriculture, Tool & Die, Oil & Gas
Key Partnerships and AlliancesPartner Details
Additional Info:
Oil & Gas
Manufacturing Plants
Manesar and Rohtak (Haryana)
Key Product Aerospace and Defense fasteners
Partner Details
Bossard AG,Switzerland
State of art fastening solutions and latest inventory management system technique through logistic supportKey Product
CategoriesAerospace and Defense fasteners and machining components
Key Customers GE, Airbus, Honeywell, Bombardier, DRDL TBRL Bharat Dynamics Ltd
q g g pp
Global Fastener Alliance
The alliance helps the company in improving competitiveness via cooperation in manufacturing, DRDL, TBRL, Bharat Dynamics Ltd.,
ISRO technical capabilities
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Source : Company Wesbite, Annual reports, KPMG Analysis
8) Larsen & Toubro
About Larsen and Toubro Key Financial InformationCompany Info Head Quartered :Mumbai, India
Key Industries Shipbuilding, Defense Systems,
■ Group Turnover FY15 – INR 92,000 Crores■ Aerospace & Defence revenues : Not Available
served Aerospace
Manufacturing Plants
Kattupalli, Hazira (Shipbuilding)Powai, Hazira, Ranoli, Coimbatore, T l (H E i i )
Key Partnerships and AlliancesPartner Details
Additional Info:
Talegaon (Heavy Engineering)
Key Product Categories
Missiles & Radar systemsElectronic Warfare & C4I systems
Partner Details
ERDE,DRDO Build radars for the Army and IAF
TATA Modernize the 155mm Bofors Howitzers and produce the Multisystems
Precision EngineeringHeavy & Civil Engineering constructions like warships,
Howitzers and produce the Multi-barrel rocket launcher
Airbus defence
Focus on components used in electronics warfare radars avionicssubmarine ships
Key Customers DRDO, Indian armed forces
defence (Cassidian)
electronics warfare, radars, avionics and mobile systems
Thales Software
AvionicsSoftwareIndia
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Source : Company Wesbite, Annual reports, KPMG Analysis
9) Mahindra Aerospace) p
About Mahindra Aerospace Key Financial InformationCompany Info Formed in 2008
Part of Mahindra GroupHead Quartered : Kolar Taluk Karnataka India
■ Mahindra Group Turnover FY15 – INR 76,015 Crores■ Aerospace and Defense revenues: Expects ~ INR 1800
crores in 3-4 yearsTaluk, Karnataka, India
Key Industriesserved
Aerospace
M f t i K l T l k (K t k )Key Partnerships and Alliances
crores in 3 4 yearsAdditional Info:
Manufacturing Plants
Kolar Taluk (Karnataka)Australia – Morwell, Port Melbourne
Key Product Manufacture of Aircrafts
Partner Details
GippsAero,Australia
Mahindra bought a 75.1% share in Gipps AerospaceKey Product
CategoriesManufacture of AircraftsAero structurecomponents
Key Customers GE (Aero structures)
Aerostaff, Australia Acquired Aerostaff in 2009
Boeing Aerostructure
Company acquired machineries from Boeing’s Aerostructures plant inKey Customers GE (Aero structures) Aerostructure
FactoryBoeing s Aerostructures plant in Australia during 2011
Aernnova, Spain & Premium Aerotech,
MoU with Aeronova MoU with Premium AerotechPremium Aerotech,
GermanyMoU with Premium Aerotech
National Aerospace Laboratories (NAL)
MoU with NAL – 5 seater aircraft production
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( ) pSource : Company Wesbite, Annual reports, KPMG Analysis
10) Mahindra Defense Systems ) y
About Mahindra Defense Systems Key Financial InformationCompany Info Head Quartered :New Delhi,
India
Key Industries Defense Land & Naval systems,
■ Group Turnover FY15 – INR 76,015 Crores■ Aerospace and Defense revenues – INR 77.3
Croresserved Aviation simulators
Manufacturing Plants
Chakan Pune, Palwal and Prithala in Faridabad near Delhi NCR Key Partnerships and Alliances
Additional Info:
Key Product Categories
Armoring solutions for Light Combat Vehicles, Multi-UtilityVehicles, Sport Utility VehiclesTorpedo launchers and decoy
Partner Details
Saab (Through Tech Mahindra)
Battlefield Management System (BMS) for the Torpedo launchers and decoy
launchers, State of the art training simulators for land forcesMobile surveillance platforms for
(Through Tech Mahindra) Indian Army
BAE Systems (Currently JV is suspended)
Futuristic Infantry Combat Vehicles
the Army and BSF, Weapons and ammunitions for the Army and Navy
K C t I di N I di AKey Customers Indian Navy, Indian Army, Paramilitary and State police forces
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Source : Company Wesbite, Annual reports, KPMG Analysis
11) MKU Private Ltd.
About MKU Key Financial InformationCompany Info Head Quartered :Kanpur, India
Founded in 1985
Key Industries Military (Protection & Armoring)
■ Group Turnover FY14 (approx) – INR 350 Crores■ Their revenues are primarily from defence
served Made forays into other business avenues such as aviation aerodynamics and technology
Man fact ring Kanp r
Key Partnerships, Alliances and Contracts
Additional Info:
Manufacturing Plants
Kanpur
Key Product Categories
Personal protectionPlatform Protection
Partners Details
EIS Electronics GMBH
The $5 million USD JV will focus on cable harness productsCategories Platform Protection
Electro Optics
Key Customers NATO, Indian Armed Forces, Ministry of Home Affairs Republic of
GMBH on cable harness products
Concord Safety Solutions (Pvt) Ltd
Partnership to create a new company to produce lightweight armoured vehiclesMinistry of Home Affairs, Republic of
EcuadorLtd armoured vehicles
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Source : Company Wesbite, Annual reports, KPMG Analysis
12) PYN Precision Components
About PYN Precision Components Key Financial InformationCompany Info Head Quartered :Faridabad,
Haryana, IndiaEstablished in 1961Now part of Northern Tools and
■ Group Turnover FY14 – INR 40 Crores■ Aerospace and Defense revenues – INR 4.2
CroresNow part of Northern Tools and Gauges Pvt Ltd
Key Industriesserved
Automobiles Components, Aerospace
Key ProductsA C
Additional Info:
served Aerospace
Manufacturing Plants
Faridabad and Bangalore
Key Product Satellite/ Payload Parts
Aerospace Components:Structural, Payload, System, avionics and controlparts for Aerospace, Precision parts for defensesector Radars, Microwave, CommunicationKey Product
CategoriesSatellite/ Payload PartsPropulsion Components Avionics Composts
Key Customers Aerospace & Defence:
sector Radars, Microwave, CommunicationHardware
Key Customers Aerospace & Defence: Bharat Electronic Ltd., ISRO, Hindustan Aeronautics Ltd.Automotive: CCarraro, American Axle, Daimler India Commercial Vehicles, Mahindra CIE, Forbes Marshall Group
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GroupSource : Company Wesbite, Annual reports, KPMG Analysis
13) Rane Group) p
About Rane Group Key Financial InformationCompany Info Head Quartered : Chennai,
IndiaEstablished in 1959
■ Group Turnover FY15 – INR 3200 Crore■ Aerospace and Defense Revenues are around
2% of company revenueKey Industriesserved
Auto components, Aerospace and Defense products, Trading of auto components Key Partnerships and Alliances
Partner Details
Additional Info:
Manufacturing Plants
Hyderabad, Rudrapur, Chennai, Puducherry, Tiruchirapalli, Mysore, Bangalore, Bawal
K P d t Wi i h
Partner Details
SasMos Wiring harness for space applications and Echo simulator used for testing RadarKey Product
CategoriesWiring harnessElectro-mechanical assemblies and Unit Integration products in
Radar
g paerospace, defence & maritime
K C t H ll B i L&T HALKey Customers Honeywell, Boeing, L&T, HAL,RAFAEL, MBDA, ISRO
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Source : Company Wesbite, Annual reports, KPMG Analysis
14) Samtel Group- Samtel Avionics & Defense System
About Samtel Group- Samtel Avionics & Defense S stem
Key Financial InformationDefense System
Company Info Head Quartered :New Delhi, IndiaFounded in 1983
■ Group Turnover FY14 – INR 150 Crores■ Aerospace and Defense Revenues: Not
AvailableFounded in 1983
Key Industriesserved
Avionics and military
M f t i G t N idKey Partnerships and Alliances
Additional Info:
Manufacturing Plants
Greater Noida
Key Product C t i
Multi-Function Displays (MFDs),SMFD C l A i i T b
Partner Details
HindustanAeronautics
Developing indigenous next-generation avionic display systems
Categories SMFDs, Color Avionics Tubes (CAT) for commercial aircraftHead Up Displays (HUDs),Helmet Mounted Sight Displays
Ltd.g p y yfor HAL's star programs
Thales Local development, production, sale and maintenance of HMSD,g p y
(HMSDs)Operator Consoles, OptronicsBuilt-to-print (BTP)/Built-to-Specs (BTS) parts
IRST
DRDO Signed an MoU with Defense Avionics Research Establishment
(BTS) parts
Key Customers Honeywell, Thales, SAAB, Hindustan Aeronautics Limited (HAL) DRDO
(DARE) to indigenize cockpit displays under the aegis of DRDO Lab's DARE
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(HAL), DRDOSource : Company Wesbite, Annual reports, KPMG Analysis
15) Sansera Engineering Pvt Ltd.
About Sansera Engineering Key Financial InformationCompany Info Head Quartered : Bangalore,
IndiaEstablished in 1987
■ Group Turnover FY15– INR 800 Crores■ Aerospace and Defense revenues – INR 20
CroresKey Industriesserved
Aerospace, Automotive, Heavy Commercial Vehicles, Two Wheelers
Manufacturing Pl t
Bangalore, Pune, Pantnagar, M (7 l t )
Key HighlightsAdditional Info:
Plants Manesar (7 plants)
Key Product Categories
Precision forged and machined componentsSeating systems
Sansera has been recently approved byAirbus for supplies of machining parts
Accreditations & Certifications: AS 9100CSeating systemsCargo systems and cargo system partsLighting system parts
Accreditations & Certifications: AS 9100C,NABL, ISO / TS 16949: 2009, ISO 14001:2004, OHSAS 18001: 2007, ISO 17025: 2005
SensorsStructures
Key Customers UTC, GKN, Airbus, Magellan, M itMeggit
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Source : Company Wesbite, Annual reports, KPMG Analysis
16) Tata Advanced Systems Ltd. (TASL)
About TASL Key Financial Information Company Info Head Quartered :
Hyderabad, IndiaFounded in 2007A wholly owned subsidiary
■ Tata Group Turnover FY15 – INR 665,185 Crores■ Aerospace and Defense revenues FY 15 -
INR 2500 CroresA wholly owned subsidiary of Tata Sons
Key Industriesserved
Aerospace and Defense Key Partnerships and AlliancesPartner Details
Additional Info:
servedManufacturing Plants
Hyderabad
Key Product Missile Systems and sub
Partner Details
Sikorsky Manufacturing 4000 parts for the S92 helicopter cabins
Key Product Categories
Missile Systems and sub-systemsRadar Systems and sub-systems
LockheedMartin
Assembly of aero-structures
ELTA MoU - Radar, Electronic Warfare, Aero structuresUnmanned Ariel SystemsOptronic SystemsHomeland Security
Systems Homeland and surveillance systems.
Cobham MoU - Air-to-air refueling equipment
RUAG Critical aero-structure assemblies for Homeland Security Solutions
Key Customers Sikorsky, Lockheed, Indian armed forces
RUAG Germany
Critical aero structure assemblies for Dornier aircraft
Pilatus Aero structures for PC-12
Airbus group To build transport aircrafts for defence
77© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Airbus group To build transport aircrafts for defenceSource : Company Wesbite, Annual reports, KPMG Analysis
17) Walchandnagar Industries) g
About Walchandnagar Industries Key Financial InformationCompany Info Head Quartered :Mumbai, India
More than 100 years manufacturing heavy engineering products and EP&C
■ Group Turnover FY15 – INR 6,382 Crores■ Aerospace and Defense revenues – INR 150
Croresengineering products and EP&C servicesAssociated with the Indian Navy since 1967 Key Partnerships and Alliances
Additional Info:
Key Industriesserved
Energy, Defense, Aerospace,Nuclear power, Industrial & Marine Transmissions, Propulsion systems
Partner Details
DCNS MoU to supply critical submarinecomponent for the Scorpene contract, t d P j t 75 b th I di NManufacturing
PlantsMumbai, Satara, Dharwad, Dahej (4 plants)
Key Product Flight motor casings
termed Project 75 by the Indian Navy.
MDL WIL is a subcontractor of MDL supplying high-end structural requirement of ScorpeneCategories Nozzles
Heat shields for various stages of space launch vehiclesGear boxes for marine
Scorpene
Masson Marine
Marine Gear Boxes
Gear boxes for marineTi & Al alloy bridgesMissile casings & launchers
Key Customers ISRO, HAL , DRDO
78© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Key Customers ISRO, HAL , DRDOSource : Company Wesbite, Annual reports, KPMG Analysis
10. Select JVs
79© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Case Study 1: Tara Aerospace Systems Ltd (Tata – Sikorsky JV) (1/2)Aerostructure Assemblies
JV partners &■ Tata Advanced Systems Ltd (TASL) – 74%, Sikorsky Aircraft company, USA – 26%
Aerostructure Assemblies
JV partners & Ownership Structure
■ Two production facilities under the JV - One for assembling the S-92 helicopter cabins and other for producing around 4000 aero structural part required for the cabins
F t it li th I di ilit d i ili h li t t iti
Objectives
■ Focus to capitalize on the Indian military and civilian helicopter opportunities■ Alternate supplier/location to replace Mitsubishi, Japan and decided to choose India■ To emerge as a facility that assembles fully built helicopters for Indian and global
customers
■ TASL investment in aerospace and defence business - INR 500 Cr in its over 5-7 years since 2007Investment since 2007
■ Investment in the JV - ~ INR 100 Cr
■ TASL - Manufactures the semi finished structural cabin assembly for the S-92
Responsibilities & work share
yHelicopters and machines around 4000 parts that goes into the cabin assembly
■ Sikorsky - Integrates the structure into its final helicopter assembly line in USA■ Plan to build the entire Naval multi role helicopters (NMRH) in India once the approval& work share ■ Plan to build the entire Naval multi role helicopters (NMRH) in India once the approval
process are through
80© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis
Case Study 1: Tara Aerospace systems Ltd (Tata – Sikorsky JV) (2/2)Aerostructure AssembliesAerostructure Assemblies
Current■ TASL Annual revenue: ~ INR 400 Cr
Current revenues/profits
■ Order book: ~ Rs 4,500 crore of the total Tata group defence order book of Rs 8,000 crore.
■ US and other export marketTarget market
■ US and other export market■ Indian Military and civil helicopter market
■ Tata’s core strengths in manufacturing, quality & engineering processes, R&D proved as h i f th JVa game changer in success of the JV
■ Tata deployed its key manufacturing experts from other business verticals thereby reducing the learning curve in absorbing the technology
Key Insights ■ The JV has been strategically formed for converting the facility to a full fledged helicopter assembly unit for India and export market
81© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis
Case Study 2: Tata Lockheed Martin Aerostructures (Tata–Lockheed Martin JV)Aerostructures for C-130J aircraftAerostructures for C 130J aircraft
JV partners & ■ Tata Advanced Systems Ltd (TASL)– 74%, Lockheed Martin Corp – 26%
Ownership Structure
■ The JV was established in 2011 to build aerostructures for C-130 Hercules and C-130J Super Hercules at TASL Hyderabad facility
■ To create high quality, low cost and built-to-print manufacturing capability in India
Objectives ■ Critical aero-structural assemblies ( Centre wing box and empennage for Hercules aircrafts)
Investment ■ Tata - ~ INR 100 crores; Lockheed Martin - ~ INR 50 croresInvestment
Responsibilities & k h
■ Centre-wing box spares, leading edges and tail empennage sections for the C130J Super Hercules Transport AircraftC tl P d t th (t il bl ) f th L kh d M ti& work share ■ Currently Produces two empennages per month (tail assembly) for the Lockheed Martin C-130 and plans to increase up to four a month as required
Target market ■ Lockheed Martin and its clients in US marketg
Key Insights
■ First JV of Lockheed Martin in India, and second JV for Tata in Aerospace components space
■ By the end of 2015, Tata will become the sole supplier to Lockheed Martin for the Key Insights y , ppempennage section
82© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis
Case Study 3: Bharat Forge Elbit Advanced System Private Ltd (1/2)Project based JV for participation in Indian army artillery program
JV Partners & O hi Bh t F 74% Elbit S t I l 26%
Project based JV for participation in Indian army artillery program
Ownership Structure
■ Bharat Forge– 74%, Elbit Systems, Israel – 26%
■ Approved by FIPB in Sep 2013K f I di ’ USD 12 14 b Fi ld A till R ti li ti P
Objectives
■ Key focus - Indian army’s USD 12 – 14 bn Field Artillery Rationalisation Programme (FARP) to up grade its obsolete artillery systems
■ To bid for India’s current 155mm 52/39 gun programs and future artillery programs such as Advanced Indian Gun Systemas Advanced Indian Gun System
■ To produce shells for the guns and armoured vehicles upgrades
Investment ■ Bharat Forge has made an investment of INR 100 Cr for expanding its defence b iInvestment business
Responsibilities■ Bharat Forge’s existing production facility will be used for prototype and mass
production after winning the orderResponsibilities & work share
production after winning the order■ Elbit will share its expertise in developing products such as ATHOS 155/52 Towed Gun
System, the ATMOS 155/52 Mounted Gun System etc
83© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis
Case Study 3 : Bharat Forge Elbit Advanced System Private Ltd (2/2)Project based JV for participation in Indian army artillery programProject based JV for participation in Indian army artillery program
Current revenues/profits
■ The JV is not making any revenues as they are yet to win any orders■ Bharat Forge as a whole is expected to generate around USD 100 mn from aerospace
and defence business by 2020■ Bharat Forge had a strong expertise in forgings which is very critical in manufacturing
these artillery systems. ■ The JV has enabled Bharat Forge to mature as a system integrator from being a
liKey Insights
component supplier■ The expertise from JV might help Bharat Forge to bag global orders for manufacturing
sub components (forgings) for artillery systems
84© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis
Case Study 4 : Multiple JVs of Aequs (formerly Quest Global) (1/2) Manufacturing Aerostructures
■ Aero structures Assemblies India Pvt Ltd - Aequs – 74%, SAAB, Sweden – 26%
Manufacturing Aerostructures
JV Partners & Ownership Structure
■ SQuAD Forging India Pvt Ltd – Equal equity distribution between Aequs , Setforge Auburt Duval, ERAMET,FARINIA, France
■ Aerospace Processing India Pvt Ltd – Aequs – 74%, Magellan Aerospace, Canada –26%Structure 26%
■ Established during 2011/2012 at Aequs private SEZ at Belgaum , Karnataka
■ The focus of the three JVs formed by Aequs is to build its capability in aero structure■ The focus of the three JVs formed by Aequs is to build its capability in aero structure manufacturing across different manufacturing processes.
■ Aequs – SAAB JV – Focus on aero structure details parts and sub assemblies for SAAB’s global plants and also for other customers
Objectives
SAAB s global plants and also for other customers■ Aequs – Magellan JV – Aerospace surface treatments■ Aequs – Setforge JV - Aero structural parts, landing gear, and braking system
components in aluminum steel titanium or nickel base alloyscomponents in aluminum, steel, titanium or nickel base alloys■ To emerge as India’s leading private sector player in precision machining, sheet metal
fabrication, assembly, forging, and special processing
Investments■ Aerospace SEZ – Total investment around INR 150 Crores■ Aequs – SAAB JV - Total investment INR 55 Crores■ Other JVs: approx 50 – 70 Crores each
85© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
pp
Source – Media reports, KPMG Analysis
Case Study 4 : Multiple JVs of Aequs (formerly Quest Global) (2/2) Manufacturing Aerostructures
Responsibilities■ Aequs has set up a state of the art aerospace SEZ in Belgaum, Karnataka housing all
the supporting infrastructure required for aerospace manufacturing
Manufacturing Aerostructures
Responsibilities & work share
the supporting infrastructure required for aerospace manufacturing■ The global JV partners will bring with them the expertise in multiple domains such as
machining, sheet metal, surface treatment and forging
CurrentCurrent revenues/profits Aequs - SAAB JV - Targets revenues over INR 265 Cr in five years
Target market Global commercial aircraft programs
■ Aequs through these strategic JVs and global acquisitions has positioned itself as a
Key Insightsleading aerospace supplier to global OEMs & Tier 1s
■ The company has chosen its partners to build its capabilities across a broad spectrum thus capitalizing the global sourcing opportunities
86© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis
Case Study 5: International Aerospace Manufacturing Private Ltd (1/2) (HAL – Rolls Royce JV)
JV partners & ■ Hindustan Aeronautics Ltd. – 50%, Rolls-Royce Overseas Holdings Ltd, UK– 50%
Th JV f ilit i B l f t t f R ll R
Aero engine components
pOwnership Structure
■ The JV facility in Bangalore manufactures compressor parts for Rolls-Royce
■ To emerge as the best supplier to Rolls Royce globally
Objectives
■ To emerge as the best supplier to Rolls-Royce globally■ To develop IAMPL as a centre of excellence with the latest manufacturing techniques
and training programmesE h hi h l dd d f t i i I di d t ib t t I di ’ i■ Enhance high-value added manufacturing in India and contribute to India’s growing aerospace and technology industry
Investment The JV has been setup with an investment of around USD 27 million
Responsibilities
■ Manufactures components for Trent 700 engines (only civil aerospace engines) which are used in Dreamliner, Airbus A350 & A330 (wide-bodied aircraft)
■ It also manufactures engine components for narrow bodied aircraft like the V-2500 i d i Ai b A320Responsibilities
& work shareengine used in Airbus A320
■ Produces around 120 different parts which are across range of Rolls-Royce civil engines (including the Trent family)
87© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis
Case Study 6: International Aerospace Manufacturing Private Ltd (2/2)(HAL – Rolls Royce JV)
Current■ IAMPL facility generates close to USD 40 million a year
Aero engine components
Current revenues/profits
■ Produces 25000 aerospace parts for Rolls-Royce per annum
Target market Rolls Royce and its target customersTarget market y g
■ HAL and Rolls-Royce have been strategic partners since 1956, when HAL started to produce Orpheus engine, under license agreement with Rolls-Royce
Key Insights■ Rolls Royce is looking to source aerospace grade steel, precision machined
components, sheet metal fabrications from low-cost countries such as India■ The Aerospace grade steel sourcing requirements for Rolls Royce is around 2000
Tonne/year and has a value of 5X times the normal steelTonne/year and has a value of 5X times the normal steel
88© 2015 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Source – Media reports, KPMG Analysis