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Mubadala enters Indian market
14 August 2010
UAE’s Mubadala plans to enter Indian aerospace market
Investor looking to shift part of manufacturing for its partner Piaggio to India, eyes entry into services and MROs
An Abu Dhabi government-backed investor with $24 billion (Rs1.12 trillion) in assets, Mubadala Development Co. plans to enter India’s aerospace market by next year and is in talks with several potential partners, including the Tata group.
The company has stakes in the US-based Carlyle Group and Zurich-based SR Technics. Along with Tata Ltd, the UK arm of the Tata group, it is also a one-third partner in Italian aeronautics firm Piaggio, which specializes in producing business jets, engine parts and structural components.
It now wants to shift part of the manufacturing for Piaggio business jets to India, where they will be cheaper to build than Italy, said Homaid Al Shemmari, executive director for aerospace at Mubadala.
“We have been eyeing the Indian aviation sector—not the airline, but the services, the MROs (maintenance, repair and overhaul of aircraft), the training—and we are trying very hard to find the right partner to penetrate the market,” Shemmari said in an interview on the sidelines of the Farnborough air show in the UK.
He declined to specify the range of investment the firm was looking at, but added that partners will be announced once they are finalized. “I wouldn’t hope anything happening before June next year.”
He said Mubadala was keen to work with the Tatas, particularly in engineering.
“They have competent engineering capabilities that they have been able to help Piaggio with,” Shemmari said. “We are very happy about that. In engineering we are definitely interested in finding the right model with Tata (for India).”
A top Tata Ltd executive said the relationship may evolve. “We are partners in Piaggio, we will see how things shape up. It’s something that is going to evolve.
There is nothing cast in stone yet,” said Anwar Hasan, managing director, Tata Ltd, over phone from London.
Businesses such as the Tatas have been gradually expanding their presence in aerospace manufacturing as India increases defence spending. Opportunities worth about $7 billion in offsets alone are likely to emerge as a result of this spending in this decade, said a public sector company official who did not want to be named.
Not all the offsets, this official said, can be absorbed by India’s biggest state-owned aeronautics firm, Hindustan Aeronautics Ltd, leaving private firms to prepare for the opportunity.
The Tatas already own 74% in Indian Rotorcraft Ltd, a joint venture between the holding company Tata Sons and Italy-based Finmeccanica SpA’s helicopter unit AgustaWestland, which will set up an assembly line for helicopters this year with an investment of $30 million.
Another Tata group company, Tata Advanced Systems Ltd, has a joint venture with Sikorsky Aircraft Corp., a subsidiary of US-based United Technologies Corp., to assemble helicopter cabins in India. TAL Manufacturing Solutions Ltd, wholly owned by the Tatas, has an agreement to build floor beams for Boeing Co.’s Dreamliner 787 aircraft.
Piaggio itself employs some 1,500 people and has strong labour unions. “They do have ambitions and we are working very closely to see how can we collaborate more on it,” Shemmari said of Tata’s aerospace park in Hyderabad.
He added that the Piaggio management has already been asked to look at the possibility of shifting parts of the manufacturing of business jets to India, and some technical work has already been sub-contracted to a Tata engineering company.
“We’re looking at manufacturing which would make best sense. The management of Piaggio is already working with the Tata group,” he said. “We are definitely interested in outsourcing some activities. Building a plane in Italy is not cheap, so we need to find the right areas where we can maybe benefit from the cost structures of India.”
However, Hasan denied that the business jet manufacturing of Piaggio was shifting to India. It was “too premature”, he said, adding such a decision has not been taken yet.
Saj Ahmad, a London-based independent aerospace analyst, said Mubadala’s strategy has been largely focused on Western aerospace firms.
“In order to keep traffic flowing into the UAE (United Arab Emirates) and to sustain the large backlog of Emirates and Etihad jets on order, Mubadala wants in on the manufacturing sector and wants to be a big sub-contractor to anyone who’ll partner them.”
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