Firms bets big on Chennai-Bengaluru defence industrial corridor

Their success or failure will eventually hinge on how much equipment the services procure, and whether the finance ministry supplements the allocations in the Budget.

With the Budget announcing a Chennai-Bengaluru defence industrial corridor, firms in the Coimbatore industrial hub are gearing up for potentially lucrative opportunities in the defence manufacturing sector.

On Monday, in New Delhi, Defence Minister Nirmala Sitharaman pledged her ministry’s support to the “defence production corridor”.

She said the stretch from Chennai to Bengaluru, passing through Trichy, Coimbatore, Salem and Hosur, housed a sprawl of ordnance factories and defence public sector units, ready buyers for what small and medium industries in the corridor would produce.

Hoping to benefit are engineering firms such as the Coimbatore-based Shanthi Gears from the low-profile Murugappa Group, a Rs 30,000 crore group that employs 35,000 workers in 28 companies with 55 manufacturing locations worldwide.

Shanthi Gears, a subsidiary of Tube Investments of India (TII), is currently a high-tech supplier of gearing to the automobile industry.

It hopes the new corridor would lead to greater participation.

Rajiv Moorthy, chief executive of Shanti Gears said the company has low-volume but has high-tech presence in the defence market.

The firm is developing T-72 tank gearboxes and superchargers for the Heavy Vehicles Factory (HVF), in Avadi, which will now be a lynchpin of the Chennai-Bengaluru corridor.

Shanthi Gears is also developing gearbox components for the range of indigenous helicopters being built by Bengaluru-based Hindustan Aeronautics (HAL).

These include the Dhruv Advanced Light Helicopter, the Light Combat Helicopter and the Light Utility Helicopter.

With an eye on the future, and on proposed projects such as the indigenous development of a main battle tank called the Future Ready Combat Vehicle, Shanthi Gears has entered a partnership with the UK-based gearbox firm, David Brown.

And in recognition of its technological expertise, Shanthi Gears is poised to contribute to a prestigious marine indigenous development project.

Yet, highlighting the difficulty that private firms have long faced in creating a large presence in defence, Shanthi Gears obtains just 4 per cent of its turnover in defence.

Moorthy hopes to grow this to 6-7 per cent this year, or Rs 15 crore out of Rs 250 crore billion turnover. In 2019-20, he plans to touch 8 per cent.

Like many defence small and medium enterprises that hope to benefit from the Chennai-Coimbatore corridor, Shanthi Gears focuses strongly on technology.

Even though its parent company, TII, already operates a large R&D centre, Shanthi Gears got its own R&D Centre approved last year by the Department of Scientific and Industrial Research, which functions under the Ministry of Science and Technology.

Hoping to harness the expertise of firms such as Shanthi Gears, Sitharaman has been promising that the ministry will handhold private industry.

More than half of her 23-minute talk at an industry gathering in Delhi on Monday was devoted to assuring support to private firms.

“In every town that is a milestone in the corridor -- Chennai, Trichy, Coimbatore, Salem, Hosur -- each has had extensive consultation process, (where the defence ministry) explained what we were looking for and what they want in turn from the ministry, so that their production capabilities can be enhanced.

"Investment in common facilities, testing labs, etc -- anything they think would be better for the government to invest, we will work it out with them,” said Sitharman.

“All this will culminate in the second week of April in the Defexpo 2018 (in Chennai).

"For SMEs, we have announced a 50 per cent reduction in space rental.

"Accent is being given for them to become active in finding buyers and partners and making sure they can display all that they can do,” she said.

While firms like Shanthi Gears are savouring this unaccustomed attention, their success or failure will eventually hinge on how much equipment the services procure, and whether the finance ministry supplements the allocations in the Budget, which have already been criticised by the military.