Defence firms eye new opportunities as defence minister talks up Chennai-Bengaluru industry corridor

Defence Minister Nirmala Sitharaman addresses industry at Trichy, a pivot of the Tamil Nadu Defence Quadrilateral

By Ajai Shukla

Coimbatore

Business Standard, 16th March 18

With the Union Budget announcing a Chennai-Bengaluru defence industrial corridor, companies located in the industrial hub of Coimbatore are gearing themselves for potentially lucrative opportunities in defence manufacture.

On Monday, in New Delhi, Defence Minister Nirmala Sitharaman pledged her ministry’s support to the “defence production corridor”. She said the stretch from Chennai to Bengaluru, passing through Trichy, Coimbatore, Salem and Hosur, housed a sprawl of ordnance factories and defence public sector units which would be ready buyers for what small and medium industries in the corridor produce.

Hoping to benefit are engineering firms like the Coimbatore-based Shanthi Gears from the low-profile Murugappa Group, a Rs 300 billion group that employs 35,000 workers in 28 companies with 55 manufacturing locations worldwide.

Shanthi Gears, a subsidiary of Tube Investments of India (TII), is currently a high-tech supplier of gearing to the auto industry. It has long been on the fringes of defence manufacture, but hopes that the new corridor leads to greater participation.

Chief executive, Rajiv Moorthy, describes Shanti Gears’, low-volume but high-tech presence in the defence market. The firm is developing T-72 tank gearboxes and superchargers for the Heavy Vehicles Factory, Avadi (HVF), which will now be a lynchpin of the Chennai-Bengaluru corridor.

Shanthi Gears is also developing gearbox components for the range of indigenous helicopters being built by Bengaluru-based Hindustan Aeronautics Ltd (HAL). These include the Dhruv Advanced Light Helicopter, the Light Combat Helicopter and the Light Utility Helicopter.

With an eye on the future, and on proposed projects like the indigenous development of a main battle tank called the Future Ready Combat Vehicle (FRCV), Shanthi Gears has entered a partnership with the UK-based gearbox firm, David Brown.

And in recognition of its technological expertise, Shanthi Gears is poised to contribute to a prestigious marine indigenous development project.

Yet, highlighting the difficulty that private firms have long faced in creating a large presence in defence, Shanthi Gears obtains just four per cent of its turnover in defence. Moorthy hopes to grow this to six-seven per cent this year, or Rs 15 crore out of a Rs 250 crore turnover. In 2019-20, he plans to touch eight per cent.

Like many defence small and medium enterprises (SMEs) that hope to benefit from the Chennai-Coimbatore corridor, Shanthi Gears focuses strongly on technology. Even though parent company, TII, already operates a large research and development (R&D) centre, Shanthi Gears got its own R&D Centre approved last year by the Department of Scientific and Industrial Research, which functions under the Ministry of Science and Technology.

Hoping to harness the expertise of firms like Shanthi Gears, Sitharaman has been promising that the defence ministry will handhold private industry. More than half of her 23-minute talk at an industry gathering in Delhi on Monday was devoted to assuring private firms of support.

“In every town that is a milestone in the corridor -- Chennai, Trichy, Coimbatore, Salem, Hosur – each has had extensive consultation process [where the defence ministry] explained what we are looking for and what they want in turn from the ministry of defence so that their defence production capabilities can be enhanced. Investment in common facilities, testing labs, etcetera -- anything that they think it would be better for the government to invest, we will work it out with them”, said Sitharman.

“All this will culminate in the second week of April in the Defexpo 2018 [in Chennai]. For SMEs, we have announced a 50 per cent reduction in space rental. Accent is being given for them to become active in finding buyers and partners and making sure they can display all that they can do”, she said.

While firms like Shanthi Gears are savouring this unaccustomed attention, their success or failure will eventually hinge on how much equipment the services procure, and whether the finance ministry supplements the allocations in the budget, which have already been criticised by the military.