India’s private sector Defence companies now have support from the government, which had lacked for many decades. It’s now a golden period, and this sector will be a sunrise sector in future, says S Rangarajan, Chairman and Managing Director, Data Patterns (India) Ltd. He spoke in length on the opportunity for the private sector and how his company will be benefitted. The company works closely with defence PSUs such as Hindustan Aeronautics Ltd and Bharat Electronics Ltd and government organisations involved in Defence and space research like DRDO and ISRO. Excerpts:
Golden period for India’s private sector Defence companies: Data Patterns’ CMD, S Rangarajan
Why do you say this is a golden period?
This government has opened up Defence for Indian industry and made it difficult for direct imports by saying work with Indian industries and make it happen here. It decided to moderate the import of Defence equipment and sources it increasingly from domestic manufacturers instead. For instance, it banned the import of 101 Defence products; the DRDO announced the indigenisation of 108 systems and subsystems. These represent the most decisive initiatives by any Indian government to promote the cause of the Defence sector. Tender sizes have increased and the order books of Defence product manufacturers are beginning to grow.
This means, looking more inwards, right?
Yes. Till now, Defence was a State subject. The Army, Navy and Air Force through the Ministry of Defence would place their orders on the PSUs who in turn would tie-up with foreign collaborators and manufacture the products in India. Or, the DRDO would and transfer the technology PSUs. So, they used to design, produce, buy, use and maintain. There was no space for Indian industry at all except as a job-shop company.
This is changing. Once the opportunity comes, I think people will stand up, but we need time.
What changes were brought by the government?
A few years back, the Ministry of Defence tenders were accessible only to foreign players. Now, only Indian companies can quote MoD tenders. Normally, when a product needs to be demonstrated, they used to tie up with a foreign company. Based on this, commercial bids would be opened. But we decided to do the product development ourselves. It was an enormous challenge as we have never designed that kind of mechanical systems and electronics. We took the challenge and designed the phase array radar from scratch. In 18-months, we demonstrated it in Visakhapatnam and cleared the trials. We got a ₹380-crore order from MoD for Precision Approach Radar. Totally, nine radars are to be delivered, out of which three have already been delivered.
How big is the opportunity for the private sector?
The government has set the target of increasing Defence production to $32 billion by 2025 from the current $12 billion and has a reserve of 68 per cent of the Defence capital acquisitions for domestic procurement for 2022 to increase the participation of domestic industries in the sector. This will be worth approximately about ₹85,000 crores and 25 per cent of this, ₹21,000 crores has been reserved purchasing from the domestic private industry.
The company reported a good financial performance in the September quarter. What factors do you attribute for this?
We started delivering more, as visibility is there to manufacture it. Our order book crossed the ₹1,000-crore mark for the first time in second quarter. We still have a good order pipeline of over ₹2,000 crore. We are getting orders for like electronic warfare, missile launchers and avionics that was designed 4-5 years ago.
What is your growth projection for the next two years?
We will grow 30-40 per cent year-on-year as we have a two-year order execution visibility. Beyond that to scale to beyond ₹2,500 crore is what we are working on and need various products. This is not a short-term game but a long-term one.
Our order book crossed the ₹1,000-crore mark for the first time in second quarter. We still have a good order pipeline of over ₹2,000 crore.