Indian IT firms eye IAF's $10-billion project

Indian information technology companies are eyeing the $10-billion medium multi-role combat aircraft deal, up for grabs from the Indian Air Force.

Of this, about $1-1.5 billion (Rs 4,600-6,900 crore) is the size of the total IT integrated services pie, that would include engineering services and IT services, said industry sources.

One of the largest deals, the $10 billion budget by the Indian Air Force for 126 multi-role combat aircraft is being eyed by global players. Six global vendors -- Boeing, Lockheed Martin, Mirage, Russian Aircraft Corp's MiG, Saab and Eurocopter -- have been shortlisted and field trials for the aircraft have already begun.

"The field trials have already begun. The final decision will be taken before the end of next year and then the project will be open for financial deals," said Minister of State for Defence Pallam Raju. This is also a project that has an offset of 50 per cent. According to India's offset policy, the manufacturer that wins the contract will either have to invest 50 per cent of the contract value or source the same amount through Indian industry.

India's defence budget for 2010 is $28 billion (around Rs 128,800 crore), of which 30-40 per cent has already been spent.

Sensing the opportunity, many of the Indian IT companies have started entering into tie-ups. India's largest IT company, Tata Consultancy Services, already designs jets for Swedish aerospace major Saab. TCS also works with Boeing, the US major.  Similarly, Mahindra Satyam recently announced its tie-up with Saab to pursue defence opportunities. The tie-up is initially looking at the global defence and homeland security market. The company also said the centre of excellence being set up will look at the Indian government's large investment plans on nationwide security.

Wipro Technologies, India's third largest IT company, is also looking at partnering with local players for this deal.