NEW DELHI — The takeover of Pipavav Defence and Offshore Engineering by Reliance Infrastructure represented the first such acquisition in India's defense arena, but analysts wonder if the new ownership will fare any better dealing with the Defence Ministry's bureaucracy.

In a late evening announcement, Anil Ambani, owner of Reliance, announced on March 4 the company had that promoted Reliance Infrastructure March 4 announced purchased an of 18 percent (cq) equity stake in of Pipavav for US at a price of $136.5 million 's stake and also assumed along with the management control. [SO 18 PERCENT STAKE BUT CONTROL THE COMPANY'S MANAGEMENT?OK]of Pipavavfor US at a price of $136.5 million On March 11, Reliance and later offered to buy another 26 percent (cq )stake for $210.5 million. , March 11.

The takeover of Pipavav Defence, which has the only Indian dry dock capable of building aircraft carriers, represents both despair and hope in the defense sector, said Nitin Mehta, a New Delhi-based defense analyst.

"With management control of Pipavav Defence, Reliance Infrastructure gets a quick entry into the defense market, where getting licenses and setting up infrastructure is difficult," Mehta said. "However, Pipavav, after getting the first license to make warships, is submerged in debt and the management is fatigued with the slow pace of growth of private companies in the defense sector.

"The acquisition of Pipavav makes an entry into the defense space by a leading industrial group, but the pain of getting business from the Indian Ministry of Defence because of the lengthy bureaucratic procurement process can fatigue anybody. Only time will tell if the new owners are able to tap the big ticket defense sector," now kept reserved only for the domestic sector," he added.

Shares of Pipavav fell 10 percent March 5 after the announcement, and an executive of stockbroker Indiabulls Securities (cq) said the market was expecting a better price for the shares. Even shares of Reliance of Infrastructure fell as the debt load of Pipavav will weigh on the company.

Pipavav Defence, owned by Nikhil Gandhi, has sought strategic partners for more than two years, according to media reports, was up for grabs for over a year [WERE THEY SEEKING A BUYER OR INVESTOR?OK]because the company was saddled with a debt of about $1 billion. A Pipavav source said the company has been trying to exit the defense business. and the owners wanted to change business [WHAT DOES CHANGE BUSINESS MEAN? GET OUT OF DEFENCE?], said a source in Pipavav.

The acquisition comes at a time when the Ministry of Defence (MoD) is preparing a tender only for the domestic shipyards to acquire six conventional submarines for worth $12 billion. In October, the 2014 the Narendra Modi government reversed a 2010 decision that which had proposed a global tender and instead decided to give the tender only to domestic shipyards, which then who further could tie up form ties with overseas defense companies. for the tender.

A Pipavav executive of Pipavav said, "We have technical tie-ups with overseas companies including Saab of Sweden, (cq), DCNS (cq) of France and Rosoboronoexport of Russia for building submarines, aircraft carriers, destroyers, frigates, (Landing Platform Deck ) LPDs and offshore patrol vessels, (OPVs) besides manufacturing of radars and electronic warfare systems for the naval ships."

The company is also planning to refurbish the 155mm artillery guns and other armored vehicles, missile systems, etc. and other platforms, he said.

"For the Air Force segment, we plan to make aerostructures, air frames and avionics besides air defense systems for the Navy, Army and Air Force," the executive added.

In 2012, Pipavav and DCNS of France announced a technical partnership to build warships. However, their relationship has not produced matured into any business orders and it is not known whether the new owners of Pipavav would strike a fresh tie up agreement with DCNS.

Overseas shipyards of DCNS, Rosoboronexport, of France, HDW of Germany and Navantia of Spain and Rosoboronexport Russia are expected to forge ties with domestic shipyards to bid for the submarine tender, likely expected to be released in the three months.

One section of the Indian Navy favors the Russian-made air independent propulsion (AIP) submarines, finding them more safe and robust, an Indian Navy official said. Another group, mostly younger, prefers the French submarines based on superior rioro a better score in electronics control and sensors. SOURCE?.field over the Russian Amur submarine.

Email: vraghuvanshi@defensenews.com

Vivek Raghuvanshi is the India correspondent for Defense News.

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