M&M eyes defence deal with British Aerospace

CHENNAI: As part of its push into the defence sector, the $17 billion SUV-to-software conglomerate Mahindra & Mahindra is in talks with British Aerospace for an alliance. Although the talks are on, "nothing has been concluded" yet, said two people with direct knowledge of the matter. M&M earlier had an alliance with British Aerospace but bought out its partner's 26% stake in their joint venture Defence Land Systems India (DLSI) in 2013.

Sources also say Mahindra is "not bidding" for a stake in Pipavav Defence & Offshore Engineering Co Ltd. There has been a buzz about Mahindra being one of the three entities interested in a stake in the company alongside the Hero Group, as well as French shipbuilder DCNS. When contacted, a Mahindra spokesperson said, "All of this is speculation and we will not comment on it."

Sources say defence is now among the top priority sectors for Group Mahindra with alliance/acquisition energy focused on it. Mahindra's last major acquisition was when it bought out 51% stake in Peugeot Motocycles for 28 million euro. Its other European acquisition — Swedish auto major Saab — is stuck in first gear. "The group is still waiting for the other side to revert on Saab and so for now it's not on the front-burner," said a source.

Mahindra's first alliance with BAE was announced in 2010 with the Indian company holding 74% stake and BAE the rest in the JV DLSI. DLSI had plans to produce anti-mine vehicles for the Indian armed forces and supplying artillery howitzers in the future. However, three years later, the two partners parted ways with Mahindra's 100% subsidiary Mahindra Defence Systems acquiring BAE Systems'26% shareholding in DLSI.

Mahindra officials said at that time that the decision was a strategic one to enable both companies approach opportunities individually.

However, even then, BAE had said in a statement that "building domestic capabilities in partnership with Indian companies will remain a cornerstone of our strategy in India. We look forward to opportunities to collaborate with Mahindra and others to enhance the role of the private sector in the defence industry."

Mahindra India