With ‘Make in India’ the new mantra, NEELAM MATHEWS reports on the advent of the private sector in India’s aerospace industry.
Earlier this year, an Indian company, Dynamatic Technologies, supplied the first Indian-built rear cargo ramp and aft pylon assemblies for the Boeing CH-47F. (Dynamatic)
A decade of policy paralysis is giving a new ray of hope to the sluggish Indian aerospace industry — until recently dominated by slothful staid public sector companies plagued with delays with neither the will, nor the inclination to innovate or move forward. Driven by the promised speedy and transparent policy for aerospace manufacturing by the, now over one year old, Narendra Modi Government, that has made ‘Make in India’ its mantra, the entry of private sector into forbidden territory is changing the very dynamics of the business.
While there remains a slip between the cup and the lip, $30bn worth of cotracts cleared by the Defence Acquisition Council (DAC) in the past year are awaiting release of Request for Proposal (RFP) that, in theory at least, needs to be closed within a year. The new defence procurement policy once announced, it is hoped, will ring in a new age in the country’s manufacturing ecosystem from the present low grade component manufacturing, moving up the value chain to high-tech products. The new policy envisages that, in future, RFP for large procurement will nominate platforms in advance which will then have to be under the Make in India programme. While the prime will be an Indian company, it will be the OEM that will choose the best company with the lowest cost it deems fit to produce its product in India. “Unlike the present Defence Procurement Policy (DPP) 2013, that puts the liability of equipment manufactured on the prime that is an Indian company — DPP 2015 mandates that the two partners share the risk jointly… New guidelines will also ensure that the military will have its choice of equipment and qualitative requirements which are often changed midway, will be clearer from the start,” said a defence ministry official to AEROSPACE.
Building Tier 1 competence
Ka-226T helicopters built in India will be produced by India’s first private sector helicopter facility. (Russian Helicopters)
“There is substantial capability being created at Tier 2 level from simple to complex geometrics for aerostructures in India,” said Rahul Gangal, Global Partner, Roland Berger Strategic Consultants, to AEROSPACE. He added while Tier 1 development is happening for rotary wing, private sector participation for fixed wing aircraft appears to be 18-22 months away with the Airbus-Tata partnership for the Avro replacement programme with the C-295, that will become “A milestone program for building Tier 1 fixed wing competence.”
Even the Russians are changing their fidelity, moving away from government-owned companies to service and manufacture their equipment. Privately owned Reliance Defence will produce Kamov Ka-226T helicopters in a joint venture following a government-to-government deal for procurement of 40 flyaway and production of 160 Kamov Ka-226T helicopters. Spread across 86 acres, the facility includes a helicopter assembly and components manufacturing at Nagpur airport in the Western state of Maharashtra, at the Reliance-owned Dhirubhai Ambani Aerospace Park. The contract, once it has been signed at the Russia-India annual summit in December, will make Reliance the country’s first private helicopter manufacturing facility, and it will ready by early 2017.
India’s large and medium private companies have already made their presence felt and are attracting business from western OEMs. Those that stand out include Tata Group, Dynamatic Technologies, Larsen & Toubro, Axis, Aequs, Samtel Avionics and Mahindra Defence Systems.
Sikorsky S-92 cabin produced by Tata Advanced Systems. (Neelam Mathews)
Things are not easy. A common refrain is that aerospace manufacturing in India is fragmented. “The only high-tech project in India that is closest to call is the Light Combat Aircraft Mk1 that has 80% foreign parts. There is an anomaly in the policy that expects 60% of indigenous content. If barely 20% of aircraft parts for an aircraft made in India are indigenous, how does the government expect 60% to be sourced in India?,” said an engineer.
“Aerospace requires R&D and the private sector is not interested in investing in it, as it is a chicken and egg situation. Without contracts who will want to put in the money?” He cites the example of a contract to HAL for 187 reconnaissance and surveillance light helicopters even as its first flight has been delayed despite the design being based on an existing model built under licence, the Advanced Light Helicopter, Dhruv. “If you cannot remodel the existing model, what kind of player are you?” adding “We couldn’t make a basic trainer and are now attempting to build a fifth generation fighter aircraft.” However, today, few can deny that HAL, working on numerous aircraft greenfield projects, no longer holds a monopoly. Increasingly, component sourcing and high value projects are moving towards private companies where trust and reliability is the primary factor, given that India’s Foreign Direct Investment is limited to 49%, where the OEM does not have an equal nor controlling stake.
While Tata Advanced Systems (TASL) has already established joint ventures (JVs) with US companies Lockheed Martin and Sikorsky to produce Lockheed Martin C-130 Hercules empennage and centre wing-box structures, and cabins for the Sikorsky S-92 medium-lift helicopters, it is the almost invisible but high-tech up-the-value-chain manufacturing that is starting to gain attention of Western OEMs.
Growing avionics expertise
Test rig at Samtel for Su-30 MFDs. (Neelam Mathews)
“Strong suppliers who possess economies of scale in their cost structure and have the balance sheet strength to invest in risk sharing programmes will most likely succeed and step up the production rate,” said a recent report by Deloitte. The medium-sized Delhi-based Samtel Group, the first Indian company in defence and airborne electronics, is living up to this, having registered many patents in display technology. Its technology for ruggedisation of LCD panels and multi-functional displays (MFD) for the Su-30MKI, is now being customised for other vendors. Samtel Thales Avionics, a joint venture between Samtel Avionics and Thales, recently dispatched the first batch of MFDs for 49 Mirage 2000 upgrade projects of the Indian Air Force. “Our policy is to move up the value chain in the technical domain,” said Puneet Kaura Executive Director. He added the company was looking at servicing OEMs globally and “partnering with customers to be part of their global supply chain.” International partnerships are growing. Samtel’s long-term contract with Honeywell to develop EFIS-40, an electronic flight instrument system, has helped break Japan’s monopoly. It also has an agreement with Saab to jointly develop and market the RIGS head up display (HUD) to provide helicopters with a cost effective display solution.
Dynamatic Technologies and a smaller medium enterprise, Aequs with a management that has moved away from a feudal architecture, have followed the road to hi-tech manufacture methodically and efficiently. “Hopefully, the professionalism showed by some of these companies will erase the memory of archaic government-owned defence manufacturer, Hindustan Aeronautics Ltd, that virtually had a monopoly in the defence business,” said an industry official. Quality issues have plagued the image of the industry yet in its infancy and will need to be addressed. Boeing recently terminated a contract to HAL for poor quality of production of weapons bay doors for the US Navy P-8 MPA.
Partnering the global OEMs
Udayant Malhoutra, Dynamatic CEO with Airbus A330 flap track beam. (Neelam Mathews)
Based on a track record of military industrial capability on the ground, Dynamatic has built a value chain of macro assemblies, detailed parts and engineering parts, creating an eco-system, Udayant Malhoutra, CEO and managing director Dynamatic told Aerospace. The company started its initial work as a developmental partner of the Defence Research Development Organisation (DRDO) producing indigenous products including the wing and rear fuselage for India’s Lakshya pilotless target aircraft, ailerons and wing flaps for the Intermediate Jet Trainer HJT-36 and major airframe structures for the Sukhoi Su-30MKI fighter. Experience gained is yielding results. Today, it is a single source supplier of flap track beams for A330 airliners. The work is divided between Dynamatic’s main facility in Bangalore and the Bristol facility of its UK subsidiary Dynamatic Oldland.
Precision engineering Dynamatic-Oldland Aerospace has complex five-axis machining capabilities for the manufacture of aerospace components and tooling. “We married the highly automated robotics and low cost of capital available in UK with the artisanal manufacturing in India to create a global delivery model of quality, cost, delivery and engineering,” said Malhoutra.
“Dynamatic was selected based on its technical capabilities, cost competitiveness and skill base,” said Airbus India Managing Director, Srinivasan Dwarakanath, adding that it is part of the airframer’s plan to boost its aerospace supply chain in India. “Through these partnerships, we can proudly claim that there’s a bit of ‘Make in India’ in all our aircraft programmes,” he added
Dynamatic has also been engaged in the development and production of airframe components for the Bell 407 since December 2013. Having completed the First Article Acceptance of aft fuselage detail parts, it ships the parts to Bell’s aircraft assembly site in Mirabel, Canada. Last year following an agreement with Textron Systems and Bell Helicopter, Dynamatic was declared a single source supplier for major airframe assemblies for the Bell 407GX and 407GT. The agreement “represents a significant milestone in Bell Helicopters’ global sourcing strategy and brings efficiencies to our manufacturing process for the Bell 407,” said Mike Loeffler, Bell Helicopters’ Vice President, Supply Chain. Earlier this year, the company produced the first set of aft pylon and cargo ramp assemblies for Boeing’s CH-47F Chinook helicopter, mentioned by the Indian Prime Minister, Narendra Modi, during his inaugural address at Aero India 2015 in Bangalore.
“The Chinook is an advanced helicopter requiring complex manufacturing processes, and this Make in India capability demonstrates that Indian companies can deliver high standards of quality and productivity within a competitive cost structure that is essential for the aerospace sector,” said Dennis Swanson, VP, Boeing Defense, Space & Security India.
UAVs pathfinding the way
Component assemblies at Aequs' facility. (Neelam Mathews)
A major project of Dynamatic is the co-development of a new generation lightweight unmanned aerial system (UAS) with AeroVironment of the US. Called the Cheel (Hindi for Eagle), the design evolved from the 5kg Raven and 12kg Puma UAS. The project is one of the six ‘pathfinder projects’ identified under the US-India Defense Technology and Trade Initiative (DTTI) earlier this year. “The first Cheel will fly 11 months after formal approval,” said Malhoutra. He added: “We look at drones as part of our larger strategy. We have integrated battle management systems, as we already have ground robots, birds that fly and ground control mobile stations.”
What was once a dream now seems a lucrative reality for the company as it readies to start a 30-acre facility near Bangalore airport where the first factory will be opened by the end of the year. Multiple plants planned include facilities for composites, assembly, detailed parts, engineering parts and final assembly.
Aerospace manufacturing in India never had to compete globally as HAL was delivered business on a golden platter. “But when we win packages on a global basis, expectations are different,” said Aravind Melligeri, Founder and Chairman of Aequs, a company that too has attempted to move up the value chain producing integrated assemblies rather than just components and sub-assemblies. Aequs specialises in precision machining, sheet metal fabrication, assembly, forging and special processing for the aerospace, automotive and oil and gas industries, with clients that include Airbus, UTAS, Eaton, Baker Hughes, Halliburton and Bosch.
Spread across 250 acres just 150km from Goa, the Aequs Special Economic Zone in Belgaum provides one of the first integrated ecosystems for aerospace component manufacturing by India’s private sector. Aequs has a definite advantage, having essential capabilities of an aerospace cluster that include component manufacturing, machining, surface treatment, forging and assembly within the same space. Clients include Airbus, Honeywell, Saab, Magellan and United Technologies.
Like Dynamatic, Aequs too has found benefits in foreign acquisition. It acquired Paris-based aerospace component maker T&K Machine for $10m, renamed Aequs Aero Machine. A second acquisition worth around $50m may be made soon. “We are looking at companies in areas where we lack gaps. Landing gear components, actuations and long bed machining,” said Melligeri.
Being a start-up in manufacturing, Melligeri went the orderly way. “We initially got expats from Manchester in 2011 to address cutting tool challenges for people to just understand the machining process. Our business is in generating chips — the faster we generate, the more money we make. The idea was to change mindsets by showing them how efficiently the work could be done.”
Melligeri said he is now comfortable in bidding for large projects. Recently, the company won a seven-year global contract from Premier Aerotech. “We are now building 45 new parts every month — up from 10-15 a month a few years ago — and might have to triple the number,” he says.
Challenges remain that slow down growth, the major spoke being high tax according to Melligeri. “Returns need to go back into business. We need much more incentive to grow.” Material issues such as getting titanium on time too are a constraint. “Titanium used for the 787 is 5553 type patented Boeing grade and is much harder. We had a tough time with the landing gear shackle we manufacture.” Forgings from VSMPO are machined in India and sent back to the OEM. Aequs recently made a minority equity investment in the Farinia Group’s Spartacus3D, an upcoming French company specializing in additive layer manufacturing (ALM), also known as 3D printing technology. “We are working to bring our first customer to India,” says Melligeri.
Moving up the supply chain tiers
The Airbus Group supply chain in India. (Airbus)
Aequs recorded $45m revenues this year, taking six years to break even. Melligeri claims he is the first Indian company to be Tier 1 to Airbus, having started by supplying detailed parts to its UK facility. “We have reached a million hours of capacity that we had forecast for 201!” he added. “However, this industry must be able to absorb economies of scale. Companies get into aerospace because they want to diversify.” The Aequs JV with Swedish SAAB called Aero Assemblies India was established “to develop a robust aerospace business focused on build-to-print assemblies for the emerging market opportunities in India,” said Melligeri.
Europeans are increasingly looking at emerging markets like India for consolidation of supply chain of small suppliers and a need for dollarisation and lower costs. Melligeri feels challenges to source a reliable and sustainable supplier base from India will include enough scale of suppliers who are diversified, reliable with a roadmap of $100m revenue by 2020.
However, things at the moment are slower than envisaged. “While ‘Make in India’ is a good concept, projects need to be awarded. The process is long and bureaucratic.” Melligeri is clear that the industry has no shortage of work. Competition is not between Indian suppliers but globally (now).”
Malhoutra agrees. “The most important part is 100% delivery performance. Why restrict OEMs to set up 100% subsidiaries? It will be good for India (if opened up), as it will get investment, technology and create jobs. We should encourage the best manufacturers to bring in their business. (Besides) We make the parts….”