INDIA BUSINESS WORLD - NOVEMBER 16^th - NOVEMBER 30^th - 2007

RAYTHEON IN MOU WITH FIVE DOMESTIC FIRMS

Five Indian defence equipment makers and technology providers, Larsen & Toubro (L&T), Wipro, Bharat Electronics (BEL), Godrej & Boyce and Data Patterns India have signed an alliance with the world's fifth largest defence contractor Raytheon.

"The company has signed memorandum of understanding with Larsen & Toubro (L&T), Wipro, Bharat Electronics, Godrej & Boyce and Data Patterns India in the last few days. These strategic alignments make good business sense for Raytheon and India," Wes Motooka, Raytheon's vice-president for international strategy and business development was quoted as saying by the international media.

The $20-billion US defence major's tie ups with the Indian companies, which are short-listed for Raksha Udyog Ratnas (RURs) status, are part of a move to tap the growing Indian defence business, said the defence experts.

A clause in the defence contracts insists that the foreign firms bidding for defence projects valued at Rs 300 crore or more have to source at least 30% of the financial worth equipment of the contract from Indian companies with RUR status, a defence expert said. In turn, the tie ups will open up ample business opportunities for the Indian companies. The government has an intention to save huge foreign exchange through reduced defence import.

Almost 12 companies, including Tata Power, L&T, Wipro and Godrej & Boyce, have been short-listed for RUR status. Once awarded, these companies will be treated on a par with defence public sector enterprises and will be allowed to access foreign technologies, enter into collaborations with overseas players and avail up to 26% foreign direct investment.

Mr. Motooka has said that the latest agreements will help it develop electronic warfare systems, radar, naval systems, tank electronics and a range of support systems. Raytheon is already working closely with the Strategic Electronics Division of Tata Power Company after an MoU in February this year.

"Raytheon's tie-up with L&T would be in avionics, especially in developing radar systems," said L&T sources. While Wipro sources said that Raytheon's tie up with Wipro would be for developing communication technology, embedded software and system design. "Godrej & Boyce and BEL may collaborate in machinery and equipment engineering. Data Patterns would jointly develop electronic products for defence and aerospace," said sources in the know.

After Washington lifted sanctions against India in 2001, the first defence contract between the two countries was for 12 Raytheon firefinder ground weapon-locating radars.

Out of an India's budgeted expenditure of Rs 6, 80,521 crore for 2007-08, a Rs 96,000 crore was earmarked for defence sector. Over the next five years, military analysts expect the country to spend as much as $30 billion on weapons procurement alone. The defence expenditure, which is expected to gallop 7% annually, is an attractive proposition for the foreign as well as domestic companies.

For years, India has been importing over 70% of the weapons and war systems from Russia, the US, France, Israel and the UK. The global defence giants such as Boeing, EADS and French shipbuilders DCN have already opened units in India to tap the growing market.