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Tata Motors banks on defence sector business, exports

27 July, 2015, The Economic Times

img_20150727070436227Tata Motors, India’s largest commercial vehicle maker, is banking on growth in its defence sector business and exports to drive 30-40 per cent of its revenues in the next three to four years as it seeks to derisk the domestic commercial vehicle business from its inherent cyclicality.

The company expects the defence business to account for 15 per cent of its total revenues, a fivefold jump from 3 per cent at present, and exports volumes to increase to 150,000 units from about 50,000 in 2014-15.

“The potential is very large…10 per cent is not a good number, our defence business can be much bigger than 15 per cent in the future,” said Ravindra Pisharody, executive director and head of commercial vehicle business at Tata Motors. Pisharody was referring to Rs 900 crore order that Tata Motors secured from the Indian Army for supplying 1,200 trucks for material handling cranes for loading, unloading and transportation of ammunition pallets, spares and other operational equipment.

The company will start delivering the vehicles by December. Tata Motors is making a gradual transition from just providing logistic support to supplying combat vehicles including front line combat vehicles. Simultaneously, the company is planning to open up new overseas markets through the hub-and-spoke model in Eastern Europe, Africa, Asean and Latin America.

Tata Motors collaborated with SUPACAT a UK-based high mobility vehicle specialist, for technical assistance for its Light Armoured Multi-role Vehicle (LAMV) project, a combat vehicle based on a defence ministry programme. The company also has a partnership with Malaysian-based DRB-HICOM for import, distribution and assembly of Tata Motors’ commercial vehicles and defence range in Malaysia, a step towards expanding into the international market.

The company has developed the WHAP (Wheeled Armoured Amphibious Platform) besides the LAMV and its upgrade programmes include missiles carriers, mine protected vehicles, main battle tanks and infantry combat vehicles.

“The first order is always difficult, with various vehicles under trial. We definitely do expect significant business from defence going ahead, as long as orders keep flowing from the government,” said Pisharody .The recent order is a major shot in the arm for the company, which has an order book of Rs 1,500 crore in its defence business. It expects to post a 20 per cent growth in the segment this year, owing to increased buying by government agencies.

Apart from India, Tata Motors has supplied defence vehicles in markets including the ASEAN, SAARC and Africa. The company recently received an order from Myanmar for about 500 units and it completed deliveries for 520 defence vehicles to the United Nations Multidimensional Integrated Stabilisation Mission in Mali.

The company’s defence division will be bidding for government contracts to supply light specialist vehicles and light armoured multi-role vehicle. The technical evaluation for both types of vehicles has been completed and the prototypes will now be tested, the company said. It is eyeing this additional Rs 3,000 crore business opportunity.

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