Reliance Industries May Invest up to $1 Billion in Aerospace Business - Source

07/28/2012| 08:50am US/Eastern

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--Applied for license to design and manufacture components and equipment for aircrafts, helicopters

--May hire as many as 1500 staffers for the business

--Reliance's entry may push government to formulate helpful rules, says analyst

(Adds analyst comment in 5th paragraph, details and background throughout)

 
   By Nupur Acharya and Anirban Chowdhury 
 

MUMBAI--Reliance Industries Ltd. (500325.BY) may invest up to a billion dollars over the next few years into its aerospace business, a company executive said Saturday, taking on conglomerates such as Tata Sons and the Mahindra Group for a part of a sector that holds high revenue potential.

"The timeline hasn't been finalized but this is one of our long-term projects," the executive, who didn't wish to be named told Dow Jones Newswires over the phone.

Companies such as Boeing Co. (>> The Boeing Company) and European Aeronautic Defence & Space Co. EADS N.V. (>> EADS) have signed defense contracts with Indian government. The companies, as per rules, have to source 30% of the deal value from Indian firms.

Aerospace manufacturing however has been minimal in India, due to high taxation and lack of infrastructure but analysts say the revenue opportunity from such offset deals could be up to $30 billion.

"Currently there is no proper regulatory framework for aerospace manufacturing in India, but Reliance's entry may spur the government in formulating some helpful laws," said Kapil Kaul, chief executive, of Sydney's Centre for Asia Pacific Aviation.

Tata Advanced Systems Ltd., a unit of Tata Sons has entered into a pact with United Technologies Corp. (>> United Technologies Corporation) owned Sikorsky Aircraft Corp., while the Mahindra & Mahindra Ltd. (500520.BY) acquired a 75.1% stake each in two Australian aerospace companies to expand its aircraft and aerospace-component-manufacturing business.

Meanwhile, Reliance Industries has applied for a license with Department of Industrial Policy and Promotion to design and develop equipment and components like airframe, engine, radars and the likes for both civilian and military aircrafts and helicopters, the company executive said.

The company, led by the country's richest man, billionaire Mukesh Ambani, has expanded into newer sectors such as retail and telecom recently.

The new business is likely to be housed under the company's two new entities - Reliance Aerospace Technologies Pvt. Ltd and Reliance Security Solutions Ltd - created about a year back. It may also hire as many as 1500 staffers to run the business, likely to be headquartered in Maharashtra.

Reliance Industries in February entered into a pact with France's Dassault Aviation S.A. (>> DASSAULT AVIATION) to work on defense projects. The pact was signed soon after Dassault Aviation emerged as the lowest bidder for a multibillion dollar order to provide 126 Rafale fighter jets to the Indian military, one of the largest arms importers in the world.

Write to Nupur Acharya at nupur.acharya@dowjones.com and Anirban Chowdhury at anirban.chowdhury@dowjones.com

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