L&T to spin off defence division; make submarines for Navy?

Larsen & Toubro''s (L&T) defense engineering division may go into development and construction of submarines. L&T is in talks with foreign firms to develop required technological expertise and know how to participate in the Indian Navy''s Project 75 and 76.

In October 2005, India signed a $3.5 billion deal with French company DCNS to acquire six Scorpene class submarines. The project includes licensed production of submarines at Mumbai''s public sector Mazagon Docks under a technology transfer agreement.

This is part of the Navy''s 30-year submarine building programme, envisaging the design and fabrication of 24 submersible vessels for force projection in the Indian Ocean.

L&T is planning to either co-ordinate with the public sector firm or with the foreign partner to enter the project, which involves building the remaining 18 submarines indigenously. Overall project cost is estimated at $14 billion to $16 billion.

As part of this decision, L&T may spin off its defence division, which can then be awarded the Raksha Udyog Ratna (RUR) status.

L&T chairman and managing director A M Naik said the company had tried to partner with Mazagon Docks for the Scorpene project, but the collaboration did not materialise. "We are interested in the submarine project. After we get the Raksha Udyog Ratna status, we will be in a better position to bid for future projects," said Naik.

The company has already made its foray into shipbuilding. L&T has received a Rs440 crore order to make four ships for the Rotterdam-based Zadeko. The company plans to invest Rs2,000 crore for a new greenfield shipyard that can make all kinds of vessels, including CNG and LNG carriers, as well as container carriers.

L&T''s defence division already makes Pinaka rocket launchers for the Indian Army, and it is bidding for refurbishment of the army''s Bofors artillery guns.

The company is apparently in talks with European Aeronautics Defence and Space Company (EADS), the parent firm of European aircraft maker Airbus, for a joint venture.

Last year, L&T''s revenue from defence production was Rs3,000 crore.