Mahindra wins the Eurocopter deal for India partnership

Mahindra Aerospace and Mahindra Satyam have signed a Memorandum of Understanding (MOU) for a trade partnership with the Eurocopter Group and its Indian subsidiary, Eurocopter India.

The Franco-German-Spanish Eurocopter Group is a division of EADS, a world leader in aerospace, defense and related services and is the world’s number one helicopter manufacturer in the civil and parapublic market with a turnover of 4.8 billion Euros.

“The partnership will be focused on manufacturing of sub assemblies, engineering and customization of civil helicopters and the joint development of specific market segments. Details of the scope and structure of the partnership will be decided in the coming months,” Mahindra & Mahindra said.

Eurocopter is estimated to have a 49 percent market share in the civil and parapublic sectors in helicopter sales and is the only international helicopter manufacturer with an Indian subsidiary.

Its parent EADS has such deals with Larsen & Toubro. EADS is keenly focused on India — a relatively unexplored market for defence and aerospace as far as local manufacturing is concerned. Nearly all of India’s needs are currently met through imports.

“Eurocopter has a solid, long term strategy for the growth of the India market, while we are already creating a niche for ourselves in the fixed-wing aircraft and aerostructures manufacturing space. We see this MOU as a significant step forward for both of us as well as the domestic aviation industry,” said Hemant Luthra, Chairman of Mahindra Aerospace and President.

The deal is a major coup for the group, sometimes relegated to the second rung of Indian corporate houses after those of the Tatas, Ambanis and Birlas.

It is believed that what swung the deal in M&M’s favor was the experience of Mahindra Satyam in aerospace engineering services and Mahindra’s overall focus as an engineering focused group.

The move has come less than a year after Eurocopter established an Indian subsidiary with a view to exploring local manufacturing of helicopters.

A joint-venture partnershlp between the Larsen & Toubro group and EADS to form a defence production company in India had run into problems after the Government felt that the deal violated India’s foreign investment cap of 26% for companies in the defence sector.

According to rules, foreign companies cannot manufacture their weapons in India even if they are meant for supply to the Indian government by setting up local units, but have to manufacture them overseas and bring the finished product to India.

India is one of the World’s biggest consumers of military and aviation equipment, but has not been able to generate much local employment from its status due to such rules. The government is afraid that manufacturing of defence equipment in India by foreign companies may not be in India’s interest and prefers to have them made outside the country.