Mahindra & Mahindra Ltd and BAE Systems have signed an agreement to create a land systems-focused, joint venture defence company, based in India. 

Mahindra will have a majority 74 per cent equity in the joint venture and BAE Systems will hold the remaining 26 per cent. The current foreign investment guidelines for the defence sector only allow equity investment of up to 26 per cent by a foreign investor.

The parties have agreed to invest around $21.25 million in the project initially. BAE Systems has agreed to invest $5.83 million in cash and Mahindra will contribute the balance.

The Foreign Investment Promotion Board had, earlier this year, approved the joint venture in which the two parent companies had proposed initial investment of $21.25 million over a three-year period.

"BAE Systems is the global number one land systems defence company and we couldn't have a better partner for this venture. We are already working together and the benefits for all parties, including the Indian defence and security forces, are clear.  We look forward to making a major contribution both to the security and economy of India," Anand Mahindra, vice chairman and managing director of Mahindra Group, said.

"As winner of the 2009 Frost and Sullivan Award for Customer Value Enhancement, which recognises excellence in customer service, customer retention and ultimately customer base expansion, Mahindra Defence Systems is a great choice to be our land systems partner in India," Guy Griffiths, group managing director international, BAE Systems, said.

"The skills and knowledge of the two companies are an excellent fit, and the values and vision which we share will allow this venture to prosper and innovate. India recently became BAE Systems' seventh home market; this new company is a central part of that strategy," he added.

The new joint venture company will have its headquarters in New Delhi with its manufacturing facility south of Faridabad, just outside of Delhi.

Initially the joint venture proposes to have about 100 employees and existing projects include the high mobility vehicle `Axe' as well as up-armoured and bulletproof Scorpios, Boleros, Rakshak, rapid intervention vehicles and the `Marksman' light armoured vehicle.

The two partners have already been working on a major new project to develop a mine protected vehicle specifically designed to meet the needs of the Indian armed and paramilitary forces, the release noted.

The companies have produced a prototype vehicle using the proven mine defeating technologies of BAE Systems South Africa RG series of vehicles and Mahindra's knowledge of Indian requirements and conditions.

The prototype vehicle currently named MPVI (mine protected vehicle India) will eventually be manufactured at the JV facility in Faridabad using indigenously produced materials, the release4 said.

The JV company also plans to enter a number of future artillery programmes, including the M777 light weight howitzer and the FH77B 155mm howitzer.

It partners expect the joint venture to become a centre of excellence for Indian artillery programmes in due course. The JV will announce future programmes as and when it becomes operational, the release added.

The $6.3 billion Mahindra Group is the market leader in multi-utility vehicles in India and is the only Indian company among the top tractor brands in the world. It also made an entry into the passenger car segment with the Logan.
 
The group has a leading presence in key sectors of the Indian economy, including the financial services, trade, retail and logistics, automotive components, after-market, information technology and infrastructure development.