Mahindra & Mahindra's Defense divisions are one of the largest suppliers to the Indian government, designing and constructing armored vehicles. It supplies up-armored vehicles to the Indian military and police at a reasonable cost using state-of-the-art technology. The defense divisions also provide defense systems like sea mines, surveillance solutions, weapons, ammunition, and partner with other countries to provide defense solutions. The Indian defense industry and M&M face challenges unique to the defense industry and from the recent entry of private sectors.

1. Mahindra & Mahindra’s Defense divisions make it one of the largest private sector suppliers to the
government, designing and constructing its own line of armored vehicles. The ability to incorporate
state-of-the-art technology at reasonable cost has enabled it to supply up-armored vehicles to the
Indian Army, Air Force and Paramilitary and State Police Forces. The defense divisions also provide
defense systems like sea mines, surveillance solutions, weapons, ammunition and more. These divisions
partner with several countries to bring them a range of defense solutions.
The Indian defense industry and M&M face certain key business issues unique to the defense industry
and also due to the very recent entry of private sector into this sector.
Private Government Partnership
The defense industry is unique in that the customer is a single entity – the Indian Government, including
the Ministry of Defense, Home Affairs or the State Governments. On the other hand, other industries
have multiple customers who can be reached through marketing and a range of communication
channels to build stable relationships. In most western countries too, the defense industry experiences a
special relationship with their respective governments.
In the context of the Indian defense industry, what measures should a private player like M&M take to
build a partnership with the government so that they are given priority over international suppliers?
Risk Mitigation
The current scenario shows peaks and troughs in demand with changing government policy and budget
allocation. Defense acquisition programs are created and tenders structured in such a way that the
winner takes all. But, companies incur high tender submission costs with no commitment of allocation
from the government at any level. How can M&M mitigate the risks involved in the tendering process?
In addition, what should M&M aim for in terms of share of services (overhaul, upgrades, maintenance,
repairs, spares) vs share of product sale to minimize risk?
Technology Capability

2. Considering that the private sector is just a decade old, denial of technology until recently has limited
the technical capability of the private players. How can M&M acquire high technical capability rapidly
through economical means? Identify the potential areas for such technology acquisition given the fact
that there is no guarantee of sale? Who could be the potential partners that can enable this?
M&M Structure
The Indian defense market is estimated to become a vast $80-100 Bn within the next decade. Currently,
75% of the defense budget is spent on purchase of equipment from foreign companies. How should
M&M restructure itself to aid indigenization by the Government of India? In which areas must M&M
seek partnerships to ensure indigenization, eg., heavy manufacturing, electronics, defense software,
communication infrastructure, aerospace and so on.
Policy Recommendations
Study countries with similar method of government functioning or industry structure like South Africa,
Brazil, South Korea to build an action plan for the Government to actively promote indigenization.
Give an industry level plan of action to ensure that indigenous sourcing accounts for 75% with an
estimated duration for achieving this. Study the public and private sector defense companies in India
and suggest a plan of restructuring the industry to promote indigenization.
What should be the Government’s approach to strengthen indigenous defense manufacturing
capabilities? What policy measures are required to ensure and speed up the process?
SME Incubation
Defense industry is marked by the presence of large scale integrators. Yet, in the western world many
small and medium enterprises provide defense software and electronics products.
Given the long gestation period and high technical capability required, start-ups find it difficult to sustain
themselves in the defense industry. Give the role and type of support that venture capitalists, defense
industry players and the government can offer in supporting the establishment and growth of SMEs.

3. Specifically in the case of M&M, how can these SMEs support the company’s direction and growth
plans? What measures should M&M take to support their growth?
Human Resource Challenge
As the defense sector opened up to private participation just a decade ago, the industry faces severe
constraints in the availability of qualified technical human resources. This is compounded by the fact
that the caliber of technical resources within the DRDO, Defense PSUs and Ordnance Factories does not
meet the requirements of M&M. How can M&M meet this ramp up challenge? What are the organic or
inorganic ways of meeting this challenge?
As a medium to long term measure, what measures should private players like M&M as well as the
Government take to enhance the output of trained manpower from technical institutions? Which
disciplines must be clustered to effectively create divisions, platforms, academies and institutions that
are specific to the defenseindustry

4. Issues affecting the sector:
FDI restriction - 26% in defence equipment manufacturing
Industrial license - cumbersome procedure
Approval process - slow, often opaque
Unclear policy regime – definition of defence equipment not clear
IPR Protection – an issue with 26% FDI
Valuation of R&D investments
Indirect Offsets not permitted
Banked credits valid for only two years
Multipliers not allowed
Technology transfer not counted
Our work in the sector
Market entry and growth strategy
o Market size, scope and mission identification
o Buying behaviour and market accessibility
o Gauge competition
o Outline strategy
Bid support
o Technical , tax & regulatory
Joint venture partner search
o Financial / Strategic
Transaction support
o Due diligence of JV partner (Financial, Legal and Tax)
o Shareholder agreements
Implementation assistance
o Tax & regulatory structuring
o Funding options
o Industrial License
o FIPB approval
o SEZ unit approval
Offset related assistance
o Structuring offset and banking proposals
o Review of offset bid
o Preparation of quarterly reports