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Corporate Feb 15, 2013

Analysts see trouble for Finmeccanica JVs but Tatas say all fine

By Firstbiz Editors

Indian corporate biggies' joint ventures with Finmeccanica have come into focus after the Italian defence equipment major's arms deal with the Indian Army sparked allegations of kickbacks.

According to an Economic Times report, Finmeccanica has 6-8 operational companies and subsidiaries in India.

Reuters

Defence analysts quoted in the report estimates Finmeccanica's annual turnover from India at Rs 1,000 crore. Reuters

Among them are AgustaWestland India, WIN Bluewater Services , Fata Hunter India , Asia Power Projects , Ansaldo STS Transportation Systems and Selex Galileo India , according to Finmeccanica's Interim Financial Report as on September 30, 2012, a report in the PTI said.

Defence analysts quoted in the report estimates Finmeccanica's annual turnover from India at Rs 1,000 crore. The country is among top three markets for Finmeccanica outside Europe, it said.

As of now some of the business dealings of the company in India are Ansaldo STS's contract with India Railways signed in 2009, Selex ES's contract to supply surveillance radar to Indian Navy; and contract with Kolkata Metro for supplying signalling equipment.

Earlier, Oto Melara, another group company, had supplied naval guns to Indian Navy in 1990s and before that in 1971 AugustaWestland supplied helicopters to Indian Navy.

Apart from these the company also has other business links. According to the report, another of its overseas joint venture had supplied 50 turboprop aircraft to Jet Airways and Kingfisher Airlines.

One of its key joint ventures is with the Tata group, Indian Rotorcraft, which has been set up to assemble 8-seater AW119Ke light helicopters for both defence and civilian usage.

According to the ET report, Tata Sons has said that Indian Rotorcraft is a proposed JV and will "assemble AW119Ke helicopters for export to AgustaWestland or for sales in the domestic civil market for civilian usage."

The company was to deliver the first aircraft in 2011, but the production has been delayed now and the delivery will begin only next year.

The ET report also quotes the Tata spokeswoman as saying that Indian Rotorcraft is in no way linked to the Indian Air Force purchase of AW helicopters. She has also said that the scandal is no threat to the joint venture.

However, the report has quoted analysts as saying that there is likely to be a question mark over Finmeccanica's joint ventures here.

"The four-decade-long India connection (of Finmeccanica) is under serious threat of unravelling," a Delhi-based defence industry analyst has been quoted as saying.

It is unfortunate that the Tata group, considered more ethical than its peers in its business practices, has forged a joint venture with a company which has a controversial past.

The Finmeccanica affair once again brings to focus the opaqueness and corruption that have been an integral part of defence deals world over.

by Firstbiz Editors

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