Larsen and Toubro Ltd. are gambling on capability it has built over the last decade to make submarines and battle tanks along with a foreign partner.
The company expects the appearance of attention for submarines and tanks by the second half of the year and orders to drip in a year or two.
L&T runs 10 factories, three R&D and other expansion centers for defense. It’s been involved in construct the hull of India’s first nuclear submarine— INS Arihant. It also started production of K9 Vajra unbreakable vehicle recently at Hazira, Gujarat.
“We have invested in the surplus of Rs 7,000-8,000 crore in the last decade to build defense capabilities far more than any other player in India,” said Patil. “We see the opportunity now getting in place which we didn’t see earlier.”
The company is the sole private player to pitch for the planned company programme for submarines, said Patil. “Since we are alone, the pricing could be at home at the cost at which public sector units produce or a competitive pricing process.”
The other player in the fray was Reliance Naval and Defence Ltd. but the company is now under bankruptcy process at the National Company Law Tribunal. The strategic company program requires the Indian partner to have significant balance sheet strength.
Patil said five years ago not more than 5 percent of the orders were earmarked for the private companies, which were deliberate for only supplying parts. This has changed.
The government has put more and more orders under spirited bidding against proposal done earlier, he said. Orders worth Rs 4.5 lakh crore are expected and half of them are available to the Indian private sector on a competitive basis, he said.
The government eased and cut down payments, bank guarantees and trial period additional room and that, Patil said, brought down the financial stress on private companies willing to participate.
But the pie is not growing. The defense budget has not moved up in the last few years. “If you have the same budget, you buy less,” Patil said.