The Tata group’s defence and aerospace arm, Tata Advanced System (TASL), has forged a joint venture with US-based defence major Lockheed Martin Corporation, makers of the legendary F-16 fighter jet, for manufacture of defence equipment and aircraft parts.
TASL, a wholly-owned subsidiary of Tata Sons, has sought the government’s approval for the joint venture in which Lockheed will have a 26% stake through a subsidiary while the Indian partner will hold the rest.
The new company, Tata Aerostructures Ltd, will design, develop and manufacture aerospace and aerostructure products.
The proposal submitted by TASL to the Foreign Investment Promotion Board, or FIPB, says Lockheed Martin’s wholly-owned subsidiary, Lockheed Martin Aeroframe Corporation (LMAC), will invest Rs 42.82 crore into the proposed venture for the 26% stake.
The Indian partner will bring in Rs 121.87 crore in the venture that is also looking to export advanced technology systems to other countries.
There is an export potential of $200 million (Rs 920 crore) over a period of five years, the Tata group said in its proposal.
Currently, foreign direct investment in defence sector is capped at 26% requiring prior government approval.
TASL’s proposal comes in the backdrop of the government mulling an increase in the FDI limit for the defence sector.
The department of industrial policy & promotion (Dipp), which formulates FDI policy in the country, has recently floated a discussion paper that suggests an increase in FDI in defence to 74% sans any commitment on local procurement.
Indian industry, however, has lobbied for a more conservative increase in overseas investment. Industry bodies CII and Ficci had suggested FDI up to 49%.