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Description of Aerospace Market of India
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India Market EntryRechtsanwalt S. Boll
18. Oktober 2011
� History in Brief
� Aerospace Clusters / Supply Chain / PSU / SEZ
� Offset-Policy & Opportunities
About this Presentation
− Identifying potential of the particular market
− Developing a fair knowledge of the market
− Creating strategies for market entry
− Target
− Implementation
→ Thanks to the previousspeakers �
→ Where is the main industrylocated? Suppliers, PSUs, SEZs?
→ Mainly regulated market entrydue to Offset Policies
→ Findings/Conclusions throughthe Offset opportunity
→ Joint Venture or Independent Entity in India
2Rechtsanwalt S. Boll (www.ra-boll.de)
History Aerospace Clusters Offset Policy
� 1911 First Airmail Service (Allahabad – Naini, carrying 6500 mails)
� 1940 Hindustan Aircraft Ltd
� 1942 Indian Institute of Science
� 1948 Aeronautical Society of India
� 1958 Defence R & D Org.
� 1959 National Aerospace Laboratories
� 1964 Hindustan Aeronautics
� 2001 Opening to private Sector
� 2011 Offset Policy Civil Aviation
- Large Public Sector Units (PSUs)Unternehmen, die dem Staatssektor zugehören.
- Luftfaht und Verteidigung waren bis 2001 ausschließlich den PSUs vorbehalten
- 2001 erlaubte der Staat ggü. Privaten mit einer „Industrial Licence“ teilzunehmen
- Defence Offset Policy 2006 / gefolgt von Liberalisierung in 2008
- 2011 Offset Policy Govt. of India & AIRBUS Industries / Civil Aviation
3Rechtsanwalt S. Boll (www.ra-boll.de)
History & Development
History Aerospace Clusters Offset Policy
Aerospace Clusters
New Delhi
Chennai
Mumbai
Hyderabad
Bangalore
Calcutta
S o u t hAerostructures
CIM tools
Dynamatic Technologies Ltd
Hindustan Aeronautics Ltd(HAL)
Pranitha
Quest
Recaero
Tata Advanced Materials Ltd
Titan
Triveni
PRS/IT
BAeHAL
CADES
HCL
Infosys
Infotech
Mahindra Satyam
TCS
Wipro
System & Equipment
Alpha Design
Ananth Technologies
ASTRA
BEL
Data Pattern
Detusch connectors
Goodrich India
HBL
ISRO (Antrix)
MachAero
Maini
Tyco
VEM Technology
Material
Mishra Dhatu Nigam Ltd. (MIDHANI)
Sundaram
System & Equipment
Applied Electro Magnetics Pvt Ltd
Precision Electronics
Samtel India Ltd
Tata Power
Material
Laxmi Precision Screws
N o r t h
Aerostructures
TAL
PRS/IT
Capgemini
Incat
System & Equipment
Amphenol
Eaton
Godrej
Material
Bharat forge
Hindalco Almex
Big Conglomerates
Kirloskar Group
L&T Group
Mahindra Group
Tata Group
W e s t
B r o a d o v e r v i e w o f t h e L o c a t i o n o f t h e I n d u s t r y
Rechtsanwalt S. Boll (www.ra-boll.de) 5
History Aerospace Clusters Offset Policy
New Delhi
Chennai
Mumbai
Hyderabad
Bangalore
Calcutta
H e a d q u a r t e r s o f t h e S u p p l i e r s
Note: Core suppliers are highlighted in red color
•TAL New Plant
•HAL
•Dynamatics
•TAML
•Quest Old Plant
•Pranitha
•CIM Tools
•Triveni Hitech
•Titan
•Recaero
•Machaero
•Maini
•Taneja
Bangalore
C o im b atore
HyderabadN a g p u r
•TATA HQ
•L&T HQ
•Godrej
•Mahindra HQ
•Kineco
•Turbocam
•Quest SEZ
•Servo Controls
•TAL Okl Plant
P u n e
•L&T Composite
Va d o d a r a
Belgaum
G o a
M u m b a i
•L&T Precision Manufacturing
Division
Rechtsanwalt S. Boll (www.ra-boll.de) 6
•SKM
•MTAR
•Microtech
•TASL SEZ
History Aerospace Clusters Offset Policy
New Delhi
Chennai
Mumbai
Hyderabad
Bangalore
Calcutta
B a n g a l o r e
REC AERO Precision
Machines parts
Safran
Eurocopter
TITEFLEX Flexible hoses Safran
SAFRAN
(Snecma-HAL)Pipes &
end fittingsSafran
GOODRICH Evacuation slides
Lighting systems
Power drive units
Airbus &
Boeing
TYCO Harness Airbus & Boeing
MACH AERO Precision
Machines parts
Safran
Eurocopter
THALES
( Thales- BEL)Radars Thales
GE Technology
CenterGE
SAFRAN Engg Center Airbus, Safran
ALTRAN Engg Center Airbus
ASSYSTEM Engg Center Airbus
CAPGEMINI Engg Center Airbus,
Bombardier
SILVER ATINA Engg Center Airbus, IAI
SONOVISION Engg Center Airbus
M u m b a iTHALES
(Thales-Rolta)C4ISTAR
information
systems
Thales
THALES
(Thales-Rolta)
Avionics
SystemThales
SOPRA Engg Center Airbus
N e w D e l h i
ROCKWELL Design Center Rockwell
H y d e r a b a d
ALTEN Engg Center Airbus
ATOS Origin Engg Center Airbus
LOGICA Engg Center Airbus
AXON
CABLEX
Harness
Harness
DEUTSCH
CONNECTOR
Harness
Schneider
CED
B a n g a l o r e
Suppliers are concentrated in the Western and Southern States of India
Rechtsanwalt S. Boll (www.ra-boll.de) 7
History Aerospace Clusters Offset Policy
I n d i a n A v i a t i o n a n d S u p p l y C h a i nNumber of Businesses and Geographical Distribution
New Delhi
Hyderabad
Bangalore
Barrackpore
Note: Core suppliers are highlighted in red color
L u c k n o w
U t t a r
P r a d e s hH a r y a n a
• 2 Companies
P u n j a b New Delhi
G u j a r a t
Maharashtra
Ba n galo re
K e r a l a
K a n p u r
K o r w a
Barrackpore
K o r a p u t
Tamil Nadu
Hyderabad
• 9 Companies • 9 Companies • 9 Companies •HAL Lucknow
• HAL Kanpur
• HAL Korwa
• 14 Companies
• HAL Koraput
• 53 Companies
• 36 Companies
• 8 Companies
• 213 Companies
• 57 Companies (Nasik)
• 10 Companies
Rechtsanwalt S. Boll (www.ra-boll.de) 8
History Aerospace Clusters Offset Policy
Public Sector Units
(PSUs)
New Delhi
Chennai
Mumbai
Hyderabad
Bangalore
Calcutta
PSUs are clustered mainly around Bangalore and Hyderabad.
Materials – Superalloys, Titanium, ...
77 M USD (FY 2009-10)
1500 employees
1 Location, 1 Manufacturing unit
Missiles & Weapon Systems
130 M USD (FY 2009-10)
2788 employees
1 Location, 2 Manufacturing units)
Shipyards
177 M USD (FY 2009-10)
5,500 employees
1 Location, 7 Manufacturing units
Shipyards
99.4 M USD ( FY2008-09)
1620 Employees
1 Location, 1 manufacturing unit
Goa
Electronics - Radars, Defence Communications,
Telecommunications
1.1 B USD (FY 2009-10)
11,700 employees
9 Locations, 11 Manufacturing units
Aeronautics ( Aircrafts, Helicopters,…)
2.37 B USD (FY 2009-10)
36,000 employees
7 locations, 11 Manufacturing units, 9 R&D centers
Space
0.2 B USD (FY 2009-10)
17,000 employees
16 locations,
18 Manufacturing units including R&D centres
Mining & Construction , Defence., Rail
775 M USD (FY 2009-10)
+12,600 employees
7 locations, 8 Manufacturing units)
BEL
HAL
ISRO
BEML
GSL
Garden Reach
Midhani
BDL
Rechtsanwalt S. Boll (www.ra-boll.de) 10
History Aerospace Clusters Offset Policy
Special Economic Zones
(SEZs)
Special Economic Zones (SEZ)
Government of India
�State Governments introduce „Aero Parks“ in combination with tax benefits;
�Field of Business: Design, Production, Maintenance;
�Role Model: Dubai, U.A.E., China und Singapore.
12Rechtsanwalt S. Boll (www.ra-boll.de)
History Aerospace Clusters Offset Policy
New
Delhi
Chennai
Mumbai
Hyderabad
Bangalore
Calcutta
7 S p e c i a l E c o n o m i c Z o n e s ( S E Z ) h a v e b e e n s e t b y t h e C e n t r a l G o v e r n m e n t .India started the economic reforms and special economic zones a decade later than China. Bangalore, Mumbaialways toped the ranking as business metros for infrastructural and other financial incentives.Due to saturation other major cities like Pune, Hyderabad, Nagpur, Chennai and Kolkata are also attracting more investments.
Mumbai (Maharashtra)
Electronics, Gems
Kandla
Multi Product
Cochin (Kerala)
Multi product
Chennai (Tamil Nadu)
Multi Product
Visakhapatnam (Andhra Predesh)
Multi product
Falta Kolkata (West Bengal)
Multi product
Noida (UP)
Multi Product
Other 91 operational SEZs set by State Government
Policy :� SEZ is a designated duty free enclave and treated as foreign territory for trade
operations, duties and tariffs� Units can be set up for manufacturing, trading or service activity� Supplies from domestic tariff areas to SEZ units treated as deemed exports� 100% Income Tax exemption for 5 years and 50% exemption for 2 years
thereafter� 100% foreign direct investment (FDI) and full and free repatriation of export
proceeds permitted� SEZ units can dispose of rejects, waste, scrap in domestic market on payment of
duties � Sub contracting part of production is also permitted
Incentives :� Investment subsidy of 20% of fixed capital invested subject to a maximum of Rs.20
lakhs (0.05 Mil USD)
� Exemption from payment of stamp duty and registration fee on registration of lease deeds for plots/built up space in the zone.
� 25% rebate on power tariff for eligible software and IT enabled service units.
� In-house customs facilities to ensure speedy clearance of goods
� Dedicated power supply and Telecom connections on out-of-turn basis
(Source:
Indiaground.com)
Rechtsanwalt S. Boll (www.ra-boll.de) 13
History Aerospace Clusters Offset Policy
Joint Venture
(JV)
Public ↔ Private
BAeHAL Software
Limited : Joint venture
company of Hindustan
Aeronautics Limited,
and BAE Systems, UK.
Deals with life cycle
software development
including design,
development, testing,
integration and
Independent
Verification &
Validation for various
aerospace and defence
applications.
Indo-Russian Aviation
Limited (IRAL): A Joint
Venture Company of
Hindustan Aeronautics
Ltd., ICICI Bank Ltd.,
RAC "MIG",
Aviazapchast PLC &
GRPZ. Deals with
Supply of spares,
rotables, consumables,
sealents for operation
and maintenance of
aviation equipments
for MIG fighter planes
Snecma HAL
Aerospace Pvt Ltd :
Joint venture company
of Snecma ( div of
Safran Group) and
HAL. Deals with
components & hoses
of CFM56 engines
SAMTEL HAL DISPLAY
SYSTEMS LTD : A joint
venture between
Hindustan Aeronautics
Limited (HAL) and
Samtel. Deals with
avionics requirements
of HAL cockpit displays
of all kinds. Involved in
system design,
development,
manufacturing, MRO
and obsolescence
management of
display systems, ATE
and IADS for all Indian
platforms.
HALBIT Avionics Pvt
Ltd : A joint venture
between Hindustan
Aeronautics Limited
(HAL) and Elbit
(Israel). Deals with
Avionics sub systems,
simulators and
training activities.
HAL-Edgewood
Technologies Pvt Ltd :
A joint venture
between Hindustan
Aeronautics Limited
(HAL) and Edgewood.
Deals with
semiconductors and
telecommunication
systems.
INFOTECH HAL Ltd : A
joint venture between
Hindustan Aeronautics
Limited (HAL) and
Infotech Enterprises
Ltd. Deals with design
services in the field of
aerospace -Aero
thermo and
mechanical design,
structural, stress,
thermal and rotor
dynamic analysis,
aeronautics,
computational fluid
dynamics, testing and
analysis, control
system design,
development and
software applications.
HAL-INCAT : A Joint
venture between
Hindustan Aeronautics
Limited (HAL) and
INCAT is a Tata
Technologies
company. Deals with
engineering and
design services of
aero structures.
Joint Ventures in Indian Aerospace & Defense Industry
Rechtsanwalt S. Boll (www.ra-boll.de) 15
History Aerospace Clusters Offset Policy
Joint Ventures in Indian Aerospace & Defense Industry
SAMTEL-THALES : Samtel
Thales Avionics is a joint
venture between Samtel
and Thales for local
development, production,
sale and maintenance of
Helmets Mounted Sight &
Display (HMSD) and other
Avionics Systems destined
for the Indian market.
ROLTA - THALES: Rolta
Thales Ltd. (RTL) is a joint
Venture of Rolta with
Thales, France. Thales is a
world leader in Mission
Critical Information
Systems for the Defence,
Aerospace and Security
markets. RTL will take
advantage of technology
transfer from Thales for
developing state-of-the-
art Command, Control,
Communications,
Computers, Intelligence,
Surveillance, Target
Acquisition and
Reconnaissance (C4ISTAR)
equipment systems to
address opportunities in
the Defence, Security and
Aerospace segments.
AIRBUS - Airspace
Infrastructure Pvt. Ltd :
Airbus has formed a joint
venture with an Indian and
Turkish firm for spare
parts and logistics support.
The joint venture (Spares
Support Solutions India),
in which Airbus will hold
26 percent, will maintain
an inventory of rotable
components used on all
types of Airbus
commercial aircraft by
operators in India for sale
and exchange
Mahindra Group -
Gippsland Aeronautics Pty
Ltd & Aerostaff Australia
Pty Ltd : Mahindra &
Mahindra (M&M)
acquired 2 Australian
companies: Australia’s
Aerostaff Australia (AA)
and Gippsland Aeronautics
(GA). Gippsland makes
aircraft ( 8 seater and 18
seater) and Aerostaff
makes high precision
metal components for
companies in businesses
such as aviation and
defence equipment.
QuEST – MAGELLAN:
Aerospace Processing
India (API) is joint venture
between Magellan
Aerospace Corporation
and QuEST Global to
provide approved
aerospace surface
treatments.
TATA - SIKORSKY : Tata
group company Tata
Advanced Systems has
formed a joint venture
with US-based Sikorsky
Aircraft to make aerospace
components in India.
Sikorsky is a subsidiary of
United Technologies Corp.
The joint venture follows
the long-term contract
signed in June 2009
between the two
companies to assemble
Sikorsky S-92 helicopter
cabins
Rechtsanwalt S. Boll (www.ra-boll.de) 16
History Aerospace Clusters Offset Policy
Offset Policy Overview
� Terminology, Rules & Regulations
� Which business is affected by this regulation?
� Market Entry Regulation vs. Offset Market Opportunity
� Emerging Trends in Indian Offset Market
� Findings/Conclusions for foreign businesses
Terminology
�Offset - signifies an element of 'compensation' as the predominant import of the term compensation / „Aufrechnung“
�India’s Offset-Policy requires foreign aerospace and defense firms getting contracts from Indian firms to engage local units for manufacturing.
�India’s Offset Policy differentiates between Civil and Military Aviation.
Rechtsanwalt S. Boll (www.ra-boll.de) 18
History Aerospace Clusters Offset Policy
There are two different Offset
policies for Military & Civil
Aerospace in India
History Aerospace Clusters Offset Policy
Rechtsanwalt S. Boll (www.ra-boll.de) 20
Aerospace and Defense Offset Policy in India
Offset policy in India
DPP-2003 DPP-2005 DPP-2006 DPP-2011DPP-2009DPP-2008
2005: Defense Procurement Policy (DPP-2005), to benefit Indian Defense Industry
Policy introduced 30% offset in contracts valued above Rs 3 billion under “buy” and 'buy and make” categories to develop Indian defense Industry
2nd Amendement 2008:
• List of products exempted from policy (Annexure-VI of
the DPP)
• Removal of license to private industry to participate in
offset programmed
1st Amendement 2006:
• Offset made mandatory as prescribed in DPP 2005 • Flexibility of forming joint ventures (JVs) with Indian firms • Establishment of Defense Offset Facilitation Agency (DOFA)
• further refinements, based on the experience and feedback from the defense industry, both Indian and foreign. • New definition of public and private sector within the DPP 2011
History Aerospace Clusters Offset Policy
Civil Aerospace Products
mentioned in DPP-2011
1. All types of fixed wing as well as rotary aircraft including their air frames, aero engines, aircraftcomponents and avionics.
2. Aircraft design and engineering services.
3. Technical publications
4. Raw material and semi-finished goods.
5. Flying training institutions and technical training institutions (excluding civil infrastructure).
Rechtsanwalt S. Boll (www.ra-boll.de) 21
Civil Aviation Offset Policy
Civil Aviation Offset Policy between
the Government of India and Airbus
� Background: In 2006 the Government ownedAirline „Indian Airlines“ (now “Air India”) placed anorder over 2.1 Billion Euros.
� This was the kick-off for the civil aviation offsetpolicy, which is a private unpublished contract.
� Both offset policies work hand in hand, since theDPP 2011 announced that a public sectorprogramme can be considered under the civil aswell as the military offset policy at the same time.
Rechtsanwalt S. Boll (www.ra-boll.de) 23
History Aerospace Clusters Offset Policy
Offset Outsourcing Areas in Indian Aerospace
Outsourcing Maturity in Aerospace
Future outsourcing areas
Engine control systems
Air control management systems
Navigation system
Emerging outsourcing opportunities
Embedded development
Control system design
Simulation
High-level aeronautical system design
Testing services
Cockpit equipment support software
Composite structuring
Currently being undertaken by Indian IT
vendors
Detailed design for modeling
Manufacturing
Drafting and field failure analysis
Non-core commonly outsourcedTesting, validation and verification
Technical documentation of designing work
Rechtsanwalt S. Boll (www.ra-boll.de) 24
History Aerospace Clusters Offset Policy
Emerging Trends in Aerospace
Offset Opportunities in India
Emerging Trends in
Aerospace Offset
Opportunities in
India
Trend A
Trend B
Trend C
Trend D
Growing Engineering services outsourcing
(ESO) in India
Increasing defense
Budget spending
Increasing domestic players involvement in Indian defense industry
Increasing overseas suppliers involvement in Indian defense industry
Rechtsanwalt S. Boll (www.ra-boll.de) 25
History Aerospace Clusters Offset Policy
Key Success Factors of
Offset PoliciesK
ey
Su
cce
ssFa
cto
rs
Rechtsanwalt S. Boll (www.ra-boll.de) 26
History Aerospace Clusters Offset Policy
Ke
y S
ucc
ess
Fact
ors
2008 2016
JV with global Tier-1 and Tier-2 companies to enter the offset market.
Look for outsourced projects from HAL.
Repair and maintenance of components and Building of MRO Units –Maintenance, Repair andOverhaul
To get outsourced projects from Tier-1 or Tier-2 players from Europe and USA.
These Projects/components will be manufactured in India and then sold on the European and American markets.
Press Reviews
�„India poised to become world‘s thirdlargest civil aviation market.“ (AeromagAsia, Vol. V, Aug. 2011, page 8)
Rechtsanwalt S. Boll (www.ra-boll.de) 27
History Aerospace Clusters Offset Policy
Implementation
�Joint Venture
�Independent Legal Entity e.g. Pvt. Ltd. (Company Act of India).
Rechtsanwalt S. Boll (www.ra-boll.de) 28
History Aerospace Clusters Offset Policy
� This document provides certain general information existing as at the time of production. This presentation does not purport to identify all the issues or developments on the matters covered in this presentation. Accordingly this document should neither be regarded as comprehensive nor sufficient for the purposes of decision making. This information provided is not, nor is it intended to be an advice on any matter and should not be relied on as such. Professional advice should be sought before taking action on any of the information contained in it.
� This document may not be used by or distributed to any parties outside the Recipient.
Disclaimer
29Rechtsanwalt S. Boll (www.ra-boll.de)
Sebastian Boll
Rechtsanwalt / Attorney at Law
Rothenbaumchaussee 71
D-20148 Hamburg
Tel. +49 (0)40 4450 6157
Fax. +49 (0)40 4450 6158
www.ra-boll.de
Thank you!
30Rechtsanwalt S. Boll (www.ra-boll.de)