SBI Caps has submitted a preliminary report to Ministry of Defence (MoD) suggesting that six defence public sector undertakings (DPSUs) can be merged given that their almost similar charter will bring “professionalism and better business prospects”.

The MoD engaged SBI Caps, the investment banking subsidiary of State Bank of India, last year seeking recommendations on the possibility of restructuring and consolidation of Bharat Electronics Ltd (BEL) with India Optel Ltd (IOL), Troops Comfort Ltd with Gliders India Ltd (GIL), and Munitions India Ltd (MIL) with Yantra India Ltd (YIL). This was after the seven DPSUs were carved out of 41 Ordnance Factory Boards (OFBs) in 2021 to bring autonomy, efficiency and accountability in the state-owned companies required to sink them with Aatmanirbharta initiatives in the defence sector.

SBI Caps refused to comment on queries from businessline sought on the content of preliminary enquiry report submitted to the MoD. “We do not reveal about our client business to a third party,” an SBI Caps corporate communication official said. SBI Caps is learnt to have illustrated fiscal data of the concerned DPSUs in its preliminary findings submitted to the MoD in November to drive their suggestion for bringing synergy in the defence companies, Ministry sources stated.

BEL’s reluctance

In a meeting MoD took on the SBI Cap report last month, the Bengaluru-based aerospace and defence electronics company, BEL, expressed reservation over onboarding India Optel Limited, the firm headquartered in Dehradun, which essentially manufactures electro-optical sensors, weapon sights and communication equipment for tri-services and central armed police force like Border Security Force (BSF) and Central Reserve Police Force (CRPF), ministry sources informed. The main reason for BEL’s reluctance, sources said, was that the well-performing public listed company is unwilling to take liabilities of IOL, which has three units of former OFBs.

The MIL, situated in Pune, manufactures explosives that are stuffed into empty ammunition rounds Nagpur-based YIL makes. Likewise, the TCL makes general item goods such as uniforms and boots and GIL produces different types of parachutes.

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But for the BEL’s second thoughts, the remaining companies do not have much of an issue on the consolidation effort that is part of a larger growth plan and future roadmap planning of the DPSUs conceived by the MoD. When asked why these companies were left behind when seven DPSUs were established, an MoD officer who part of that previous exercise stated that at that point of time the target was to corporatise OFBs only. The MoD, if it decides to go ahead with the latest move, will have to seek nod of the Union Cabinet for the final merger.

In 2021, the MoD got a study done from leading consulting companies to have a vision plan for the growth of all defence companies plagued with high costs, inconsistent quality and delay in supply of products. While corporatisation of the OFBs took place, and consolidation of six other DPSUs is being attempted at, efforts for bringing synergy among government owned shipyards is still to roll out.

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