Manufacturing of

Defence Vehicles

Aerospace and
Defence
Government of Gujarat
Contents

Project Concept 3
Market Potential 4
Growth Drivers 6
Gujarat – Competitive Advantage 7
Project Information 8
- Location/ Size
- Infrastructure Availability/ Connectivity
-Raw Material/Manpower
- Key Players/Machinery Suppliers
-Potential Collaboration Opportunities
Project Financials 13
Approvals & Incentives 15

Page 2
Project Concept

What are defence vehicles

► Defence vehicles are armoured land automotive used for combat and logistics purposes by
military forces.
► Armoured vehicles are protected by strong armour and generally armed with weapons capable
of carrying out offensive /defensive operations in battlefield.

Different categories of defence vehicles

► Heavy combat vehicle used to perform direct fire support roles using mounted
Main battle
tank gun
tanks (MBT)
► Weight: >45 tons

Armored ► Used to mobilise troops in the battlefield

personnel ► It has limited firepower options
carrier (APC) ► Weight: 15-35 tons

Infantry ► Medium weight combat vehicle with fire power provided by medium caliber
fighting guns
vehicles (IFV) ► Weight: 30-45 tons
Light multi- ► Light armored 4X4 bullet proof vehicles used for patrol, liaison and command
role vehicles roles
(LMV) ► Weight: 5-12 tons
Mine resistant
ambush ► Armored vehicles capable of countering improvised explosive devices (IED)
protected providing increased vehicle survivability and crew protection
(MRAP)
► Used primarily for logistics purposes
Tactical trucks ► Weight may vary from five-tons general purpose trucks to 70-ton heavy
equipment transporters (HET), capable of carrying battle tanks

► Indian defence vehicle market size Indian armored defence vehicles market* (2015)
stood at INR 10,100 crore* in 2015.
MBT and IFV are two largest
3%
segments contributing more than two- 4%
third of overall demand. 7%
34%
► Most of the demand for defence
20%
vehicles is generated to address the
safety of military and paramilitary
troops operating in terrorism and
33%
insurgency effected areas.
MBT IFV MRAP Tactical trucks APC LMV

IUS$ =I NR67.93 Source: strategic defence intelligence *also include defence vehicle related MRO services

Page 3
Market Potential

Global armored defence vehicles market

► The global armored vehicle industry is expected Global armored vehicles
to grow at a CAGR of 2.6% during 2015-19 to market (US$b)
reach US$ 27.1b.
► The US was the largest market for armored
vehicles followed by China, Russia and India in
2015. CAGR:
► Going ahead, demand form armored vehicles is 2.6%
likely to increase with rising military 27.1
expenditures by eastern European, west and
south Asian countries driven by regional geo- 24.5
political dynamics.
► However, the US and European demand for
armored vehicles is likely to be constrained due 2015 2019e
to withdrawal of forces from Afghanistan and Source: SG Analytics
*excluding defence vehicle related MRO services
Iraq.

Market Potential - India

Indian armored defence vehicle and related MRO market forecast (US$b)

2.1
1.8 1.9 1.8 1.9 1.9 1.9
1.7 1.7 1.7
1.5

2015e 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e
Source: strategic defence intelligence

► Indian armored defence vehicle market stood at around US$

1.5b in 2015 and is expected to reach US$2.1 by 2025, Cumulative
growing at a CAGR of 3.4%. market
opportunity
► The steep fall in 2021 is majorly due to expected end of between
procurement of T-90S tank under MBT category in 2020. 2015-25:
► The industry is likely to provide cumulative market opportunity
of around US$19.9b during 2015-25 driven by favorable
government policies and India’s enhanced focus on border
US$19.9b
and internal security.

Page 4
Market Potential

Indian armored defence vehicle market (US$b)

Segment 2015 (US$b) 2025 (US$b) Total market 2015-25

(2015-25)(US$b) growth
IFV 0.50 0.66 6.3 2.8%

MBT 0.52 0.54 6.0 0.3%

MRAP 0.30 0.57 4.9 6.5%
APC 0.06 0.87 0.8 3.7%
Tactical trucks 0.11 0.13 1.2 1.9%
LMV 0.05 0.09 0.7 6.6%
Total market 1.5 2.1 19.9 3.4%

Source: Strategic Defence Intelligence

► MRAP vehicles are likely to grow at the fastest rate (6.5%) among defence vehicles as they
provide safe mobility of soldiers against mines explosive/IED attacks. IEDs are one of the
most widely used weapons by insurgents/terrorists.
► The police departments in naxal affected states including Jharkhand, Chhattisgarh
and Odisha are expected to contribute significantly to the growth of demand for MRAP
vehicles.
► IFVs are likely to constitute the highest share (~32%) of the armored vehicles demand. The
Indian Army plans to replace its ageing IFV fleet of Russian designed BMP-II* operational
since 1980.
► India relies significantly on tanks to fight land battles and plans to modernize its existing MBT
fleet. This is expected to create opportunities worth US$ 6b between 2015-25.
► India shares land borders of around 15,100 kms with its neighboring countries
(including 3,500 kms with China and 3,000 kms with Pakistan), making land defence
crucial for the country’s safety.
► India is planning to develop new battle tanks using Russia’s latest battle field tank-
“Armata” as prototype.
► LMV, APC and tactical trucks together are likely to create an additional demand worth US$
2.7b between 2015-25, majorly to be procured by the Indian army and various state police
departments.

*Boyevaya Mashina Pekhoty-2

Page 5
Growth Drivers
1. Increasing defence spending and target to reduce reliance on
imports
► India’s defence budget is likely to continue growing (it has increased by more than 66% since
FY11) owing to potential threats from its neighbors, China and Pakistan.
► India has the fourth largest defence budget globally after US, China and UK.

► India’s target to reduce its reliance on imports of defence equipment is likely to boost the
opportunities for domestic manufacturers (India is the largest importer of arms globally).
► India currently imports around 70% of its defence requirements and targets to reduce
imports contribution to around 35% by 2030 mostly from Russia and the USA
Indian defence budget (INRb)
2330
2580 ~ 36%
2224
2034 of defence expenditure is spent on
1709 1818
1541 arms, equipment acquisition and
capacity building

>60%
of defence equipment are
FY11 FY12 FY13 FY14 FY15 FY16 FY17 imported from foreign countries
Source: defence proac, Make in India

2. Government of India (GoI) initiatives

Launched “Make Increased FDI Limits Allowed Implementation

in India” campaign defence exports of offset policy
► The GoI has increased
► The GoI has ► The GoI has ► As per the offset
the permissible FDI limit
identified defence in defence through also allowed policy, foreign
manufacturing as automatic approval private companies
a key sector route to 49% from 26%. manufacturers, exporting to India
under its “Make in Further, the GOI can including are required to
India” campaign, approve FDI up to 100% foreign-Indian invest 30% of the
an initiative to on a case-to-case basis, JVs, to export contract value in
attract especially where certain the Indian
investments modern technologies ammunitions industry, either
across sectors. are involved. to friendly through direct
countries procurement from
► It has announced ► It is also supporting local players or
without prior
tax incentives manufacturing initiatives through transfer
approval.
and export involving JV and of technology.
incentives for alliances among foreign
defence and local players
manufacturing through transfer of
projects. technology.

Page 6
Gujarat Competitive
Advantage
Advantage Gujarat

22
Defence industrial
Strong manufacturing Testing center for Power surplus
licenses granted to
industry armored vehicles status
GoG*

Gujarat has a GoI has granted The state has Asia’s Gujarat is a
significant number 22 industrial only ballistic power
of manufacturing licenses for research center for surplus state
units which can be defence testing armored with an
leveraged to satisfy manufacturing in vehicles at Gujarat installed
the offset policy of Gujarat since May forensic science capacity of
the defence sector. 2014 (joint highest university in around 29
There were around with Maharashtra Gandhinagar. This GW (second
22,587 large among all the will make India self highest in
manufacturing units states), overall reliant in testing India).
and more than GoI has granted armored vehicles
260,000 SME’s in 121 licenses for (up till now armored
Gujarat in FY13. defence vehicles were
manufacturing. tested in Europe).
*GoG: Government of Gujarat .

Availability of skilled manpower

Engineering seats in Gujarat – by
specialisation (2013)
Gujarat has good educational infrastructure with
premier institutes in engineering, management, Mechanical 16,230
technology etc.
In 2013, Gujarat had ~120 engineering degree Civil 9,950
colleges with an approximate intake of more than
60,000 students per year.
Electrical 9,839
The tally of subject-specific seats is led by
mechanical engineering with 16,230 seats, followed
by civil (9,950 seats), electrical (9,839 seats) and Computer 8,160
computer science (8,160 seats).
Electronics &
Major engineering colleges in Gujarat that provide 7,080
Communication
auto engineering courses include:
► LDRP institute of technology and research Information
3,555
Technology
► Government engineering college, Rajkot

► Ahmedabad Institute of Technology Others 6,069

► ITM, Vadodara

Page 7
Project Information

Armored vehicles manufacturing*

Engine Press Tier1 Metal forming

manufacturing shop suppliers

Engine block casting Manufacturing of Over thousand Lightweight composite

is manufactured as automotive panels components including material (polyethylene)
per required including doors, roofs, gear box, clutch, armor is added to each
dimensions pillars etc. brakes are sourced of the sides and roof
from tier1 suppliers

Bullet proof Assembling Installing sensors Mounting

glass and security systems weaponry
Transparent bullet proof Components are Weapons including
Communication
glass manufactured from finally assembled tactical remote turrent
systems, security
polycarbonate together using (TRT) are mounted on
locks and sensors are
(thermoplastic) material fasteners, welding etc. the vehicle as per
installed
sourced for windows requirement

Manufacturing of MBT is different from other armored

vehicles majorly with regard to following aspects:
Manufacturing
► Capable of heavy firepower primarily through main
of MBT
tank gun
► Caterpillar tracks are used instead of tires for
mobility to facilitate spreading of MBT heavy weight

*investor may set up manufacturing facility for one or more parts and source the rest from vendors.

Page 8
Project Information

Location suggested: Dholera special investment region (SIR)

► Dholera SIR in Ahmedabad district is an indicative location for setting up UAV manufacturing
facility. Alternatively, other suitable locations in Gujarat can also be considered.
► Dholera is a coast city in Gulf of Khambatt located on Delhi Mumbai Industrial corridor (DMIC).

Dholera SIR : Key highlights Delhi Mumbai Industrial

DMIC influence
corridor (DMIC)
area
Area 920 sq. km
Vadodara
Developable
567 sq. km
area

INR 600/ sq. meters

Land price
(Oct’15) Kandla
Heavy Engineering,
automobile and auto
ancillary, defence, Ahmedabad
electronics,
Focus pharmaceuticals, Dholera SIR
industries metals and
metallurgical products, Bhavnagar Surat
agro and food
processing, IT and
ITeS

Distance of Dholera SIR from major cities (in kms)

Mumbai 516 Jamnagar 313

Delhi 815 Rajkot 225

Surat 278 Gandhinagar 128

Why Dholera Images of the proposed site

► Government of Gujarat (GoG) is offering

plots measuring up to 8 sq. kms in area to The
promote defence manufacturing in Dholera development
(large area facilitates operating and testing of proposed
of defence equipment). site is under
► Robust infrastructure in the region (refer to progress
the next slide for details).
► Access to both domestic and international
markets through key logistics nodes.

Page 9
Project Information

Logistics & Connectivity

Rail Road

► Rail connection is being planned for ► National Highways: NH–8 connects

Dholera, while the nearest meter gauge Dholera with Ahmedabad, Bhavnagar and
connection is Bhavnagar (34 km) and Mumbai. It also has good connectivity with
the nearest broad gauge station is NH-8A connecting it to Anand and
Tarapur (103 km). Vadodara.
► A metro rail is also being proposed from
Gandhinagar to Dholera via
Ahmedabad.

Air Port

► A new airport is proposed in Dholera SIR ► A seaport site is proposed near SIR
on a land area of 1,426 hectare. (government has already allocated 2,057
► It will be the second international airport hectare land).
in Gujarat, the only other international ► Other key seaports near the SIR are
airport is located in Ahmedabad (120 Bhavnagar 60 (kms) and Kandla (340 kms).
kms from Dholera).

Utility

Water Power

► Electricity will be supplied by Gujarat

► Gujarat Industrial Development Energy Transmission Corporation (GETCO).
Corporation (GIDC) will provide water to ► Power will be supplied from Fedara (30kms)
the proposed facility. substation and 38 kms of transmission line
► Raw water will be supplied from will be laid in the SIR at an investment of
Saurashtra branch canal. INR 1106crore.

Gas

► Gujarat State Petroleum Corporation (GSPC) will supply gas to the site through a well
established pipeline.
► The company needs to apply directly for gas to GSPC.

Page 10
Project Information

Sourcing of raw materials

Major raw materials used:

► Steel ► Ceramic
► Aluminum ► Glass
► Titanium ► Composite (layer of two or more materials with
► Plastic significantly different chemical properties)

Location (Distance from Location (Distance

Industry Industry
Dholera) from Dholera)
► Kheda (91 km)
Foundry & ► Anand (94 km) Plastic and ► Sanand (97 kms)
Forgings ► Surendranagar (88 km) polymers ► Dahej (210 kms)
► Rajkot (176 km)
► Hazira (310 Km) ► Vadodara (372 kms)
Steel Glass
► Kutchh (431 Km) ► Jhagadia (211kms)

Project structure
Project is likely to a be a private investment by:
► an existing armored vehicle manufacturer (potentially in collaboration with JV)
► new entrant/s in the industry
► foreign investor/s looking to enter Indian armored vehicle industry

Estimated manpower required (approx. 2,500)

Designation Number of employee

President 1
Sr. Vice president (SVP), Vice President (VP), Assistant Vice
President (AVP), 5-10
General managers, Sr. managers, managers, assistant.
Managers 25-30
Sr. engineers, engineers, assistant engineers 150-200
Skilled workers 750-1000
Unskilled workers 750-1000

Page 11
Project Information

Leading domestic players in the industry

Company Product portfolio Major collaborations

L&T MBT, MRAP Raytheon

Tata Motors APC, LMV, IFV, Tactical trucks Bharat Forge, General Dynamics
M&M LMV, MRAP, IFV, APC BAE systems
Bharat Forge LMV, IFV, APC, MRAP Tata Motors, General Dynamics,
Elbit systems
Asian Motor works Tactical trucks NA
Ashok Leyland LMV, APC, MRAP, Tactical trucks Lockheed Martin, Paramount group,
Nexter, Krauss-Maffei Wegmann
Indian Ordnance MBT, MRAP NA
factories

Potential foreign collaboration options for domestic players

► Oshkosh (US) ► Nexter systems (France) ► Doosan (South Korea)

► Lockheed Martin (US) ► General Dynamics (US) ► Iveco (Italy)
► BAE systems (UK) ► Thales (France) ► Navistar (US)

Page 12
Project Financials
Cost of setting-up an armored vehicles manufacturing** plant with capacity of around 200
units is likely to be ~INR 6000 million*

Project cost
Project components & specifications Cost (INR
million)
Land (Area: approximately 65,000 sq. meters, 16 acres) 39
Rate: (INR 600 per sq. mtr.)
Buildings (plant area, office, godown, lab, service area etc.) 180
Built-up area: 40,000 sq. mtrs.
Average rate: INR4,500 per sq. mtr.

Process plant and machinery, Working capital and miscellaneous 5250*

expenses
Total investment in land, machinery and working capital 5469
Contingency (@10% of machinery, land and building) 541
Total investment required : ~INR 6000 million*

Means of finance
Estimated industrial average (Debt/equity) 0.88 : 1.00
Debt raised (INR million) 2806
Equity invested (INR million) 3194
Estimated debt raised (INR million): 2806

*Figures mentioned are indicative to provide a tentative framework for the investor. The numbers are based on
recent investment announcements by major firms in the industry.
**The indicated plant is for IFV manufacturing

Other proposed projects in the region

Company Project Location Investment Other details

Bharat Forge Upgrade and Dholera INR 6000 2,500

(Kalyani group) overhaul armored million manpower
vehicles
Mahindra and Defence vehicle mfg. Kutch/Dholera NA will span over
Mahindra 2,000 acres
(M&M)

Note: 1) Detailed breakdown of other cost components, such as civil works, process plant and machinery, utility and
other equipment, contingency and working capital margin money is not available)

Page 13
Project Financials

Payback period
Capacity (units) 200
Average capacity utilization in industry (%) 75%
Production (units) 150
Average revenue per unit (AR) (INR million/ unit) 40
Industrial average EBITDA margin 19.5%
Forecasting revenues at expected industrial growth rate 3.4%
Time (years) 1 2 3 4 5
Revenue (INR million ) 6000 6204 6415 6633 6858
EBITDA (@19.5%** of rev.)* 1170 1209 1250 1293 1337
Undiscounted cumulative cash
flows 1170 2379 3629 4922 6259
Investment 6000
Estimated payback period: 4.8 years
+Investor
may also target export markets
*EBITDA is assumed as proxy for cash flows

Minimum viable size (all figures in INR million unless stated

otherwise)
EBIT margin (Industry average) (%) 14.5%
Total operating costs (as% of revenues) 85.5%
Total costs (85.5% @ 600) 5130
Depreciation cost (9.2%** of 315 crores)*** 290
Employee costs (11.5%** of TC) 590
Finance cost (16%** of debt) 450
Total fixed cost (FC) 1330
Variable cost (VC= TC-FC) 3800
Variable cost/Unit 25.3
Average revenue/unit 40
Minimum viable size (FC/(AR-VC)) (units) ~91
Estimated minimum viable size: ~91 units

**Industrial average
***Asset base is assumed to be 60% of total investment in PPE and working capital (INR 3150 million)

*Rest 60% is assumed to fall under labor cost which is included in VC

Page 14
Approvals and
Incentives
Indicative List of Approvals
Approvals/clearance required Department to be approached and consulted
Incorporation of company Registrar of companies
Registration/Industrial license Secretariat if industrial assistance (SIA) for large and
medium scale industries
Allotment of land State industrial development corporation
No objection certificate (NOC) under State pollution control board
air and water pollution control acts
Approval of construction and country ► Town and country planning
planning ► Municipal and local authorities
► Chief inspector of factories
► Pollution control board
► Electricity board
Use and storage of explosives Chief controller of explosives
Finance For loans higher than INR 1.5 crore, all India financial
institutions like Industrial Development Bank of India(IDBI),
Industrial Credit and Investment Corporation of India(ICICI),
Industrial Finance Corporation of India(IFCI) etc.
Registration under state sales tax act ► Sales tax department
and Central and State excise act ► Central and state excise department
Code number for export and import Regional office of director general of foreign trade

Environmental clearance Ministry of environment, forest and climate change after

conducting environment impact assessment (EIA) for any
project
Facilitation for setting up project Industries Commissioner will facilitate for state clearances
required to set up project.
Hazardous waste import and export Ministry of environment, forest and climate change
approval
Exiting business Ministry of corporate affairs

GoG has introduced single window facilitation portal for investors with undermentioned benefits:
► Centralized system to monitor applications
► User friendly and simplified application process for investors
► System for authorities and investors to check the status of applications
► Increased departmental ownership
► The unit shall be facilitated through ‘Investor Facilitation Portal’ for obtaining all the
necessary state approvals/ clearances - https://www.ifpgujarat.gov.in
Page 15
Approvals and
Incentives
Gujarat Industrial Policy 2015
Government of Gujarat has announced an ambitious Industrial Policy, in January 2015, with the
objective of creating a healthy and conducive climate for conducting business and augmenting the
industrial development of the state.

Quantum of incentives
The incentives under this policy will be available to all the Talukas listed in Government Resolution
dated 25/7/2016 except municipal corporation areas.

% of eligible fixed
Category of % of Net VAT % of Net VAT to be
capital investment Incentive period
Project Location reimbursement to paid to
entitled for (no. of years)
(Taluka) the unit Government
Incentive
1 100 90 10 10
2 80 80 20 10
3 70 70 30 10
Net VAT incentives
Net VAT incentive will be reimbursed to the industrial undertaking in one financial year will not
exceed one-tenth of the total amount of eligible incentive.
Classification of the Project Amount (in INR crore)
Ultra Mega Industrial Unit 500
Mega industrial Unit 400
Large Industrial Unit 150
Micro, Small or Medium Industrial Unit 50

Incentives under Gujarat A&D manufacturing policy - 2016

Government of Gujarat is in the process declaring an incentive scheme for Aerospace and defence
manufacturing in the State.

Page 16
 Department of industrial policy and promotion
http://dipp.nic.in/English/Investor/Investers_Gudlines/Inv_guielines.aspx
Ministry of Defence
www.mod.nic.in/
Industrial License
https://www.ebiz.gov.in/industriallicense
Industries Commissionerate
www.ic.gujarat.gov.in
Ministry of environment, forest and climate change
http://envfor.nic.in/major-initiatives/environmental-clearances
Industrial Extension Bureau
www.indextb.com

This project profile is based on preliminary study to facilitate prospective entrepreneurs to assess a prima facie scope.
It is, however, advisable to get a detailed feasibility study prepared before taking a final investment decision.

Office of The Industries Commissionerate

Block No. 1, 2nd Floor, Udyog Bhavan,
Gandhinagar 382 010. Gujarat
Ph.: 23252683/23252617
Email ID: [email protected]
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20. Means of financing calculated using industrial average (peers include M&M, Tata Motors, Pipavav Defense, Bharat Forge,
HAL)

14 Assumption:
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