Defence Manufacturing …..a multi billion opportunity

Industrial Update – Newsletter – July 2023: IMAP’s Industrials group brings you this monthly update with a focus on latest news, transactions and interesting snippets from the Industrials domain in India

Defence Manufacturing …..a multi billion opportunity!

At ~$74 Bn, India’s annual defence budget is the 3rd largest in the world (though 1/10th of US and 1/4rd of China). To reduce import dependence and give a boost to manufacturing, India has set a target of domestic manufacturing worth US$ 22 billion by 2025 (including export of Rs 35,000 crore) catering to defence and aerospace industry..

To exploit this huge opportunity, established and emerging players are gearing up. As per government record, India has around 190 defence start-ups building innovative tech solution. Other better established players such as Tata Advance Systems, Bharat Forge, HAL, BEL, Bharat Dynamics etc. act as system integrators who source components from smaller players.

Exports  also reached an all-time high ~US$ 2 billion in FY23, a 10x increase since FY17. Currently India exports some major military equipment such as Light Combat Aircrafts (LACs), Brahmos Missiles, Akash Missile System, Radars, Simulators, Mine Protected Vehicles, Rockets & Launchers, Body Armours,  etc.

GoI has taken numerous policy initiatives simplifying procedures for procurement and export of defence products, funding of up to 70% of development cost by GoI, hike in FDI to 74 % through the automatic route; established 2 defence corridors in states of UP and TN that have already signed 158 MoUs with industry players

Some recent transactions

Jul’23Multitech AutoThe auto component manufacturer was fully acquired by Ramkrishna Forging for ₹205 Cr.
Jul’23Ethereal MachinesThe CNC machine manufacturer raised ₹59.8 Cr. in a fund raise let by Blume ventures
Jul’23Amidc AutomationThe autonomous robot manufacturer raised ₹90 Cr. in a fund raise led by Blume Ventures
Jul ’23Greencell MobilityThe company raised ₹ 3000 Cr. in funding from REC Limited
Jul’23Diptab  VenturesThe Logi-Tech company raised ₹ 205 Cr. in funding from Bertelsmann India
Jul’23Neuron EnergyThe Li-Ion battery manufacturer raised ₹20 Cr. in a fundraise led by Equanimity fund.

Recent News

  • Weeks after exiting a US$ 19.5 billion JV to develop semiconductors in India, Foxconn announced plans to invest US$200 mn for manufacturing electronic components; also U.S. memory chip firm Micron Technology announced an outlay of $825 million over 2 phases in a new chip assembly and test facility in Gujarat
  • Meta has unveiled Threads, a text-based conversation app as a rival to Twitter. Threads is linked to Instagram, Meta’s existing social networking site allowing users to easily switch between the two
  • China GDP grew by 0.8% in Q2 of CY23 as compared to 6.3% over same quarter last year – property sector is providing a drag, exports have dropped all amid a possible deflation
  • Manufacturing PMI in Jun’23 dropped to 57.8  from 31-month peak of 58.7 in May’23; PMI value above 50 indicates growth

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