Thales' offset liability from the Mirage upgrade contract amounts to euro 441 million (Rs 3,000 crore). That induces Thales to source from SDS a significant share of the avionics (aviation-electronics) for upgrading the Mirage-2000. SDS, with whom Thales has a joint venture company, Samtel Thales Avionics, is poised to meet that requirement. SDS already supplies Hindustan Aeronautics Ltd (HAL), India's sole aircraft manufacturer, with cockpit displays (multi-function displays, or MFDs) for the Sukhoi-30MKI fighters that are built at HAL's Nashik plant. The Ghaziabad-based company is also competing to build avionics for the IAF's forthcoming Sukhoi-30 MKI upgrade.
And, if the Rafale fighter — built by Dassault with a large avionics component from Thales — is chosen by the MoD as the IAF's new medium multi-role combat aircraft (MMRCA), SDS could benefit enormously from another wave of offset-driven orders for display systems and other avionics in the 126 MMRCA. "We are looking at a turnover growth from Rs 60 crore in 2011-12, to about Rs 500 crore in 2015-16," Puneet Kaura, executive director of SDS, told Business Standard.
Samtel Thales Avionics (Thales 26 per cent; Samtel 74 per cent), incorporated in 2008, is Thales' only joint venture in India. The French company is currently setting up another JV with Bharat Electronics Ltd for manufacturing radar components.
"Thales wants to build on our maturing relationship to make us a major supply source for avionics. They are looking at India very seriously, given the size of the deals they have signed or are contemplating," says Puneet Kaura.
Thales shares Kaura's optimism. Eric Lenseigne, who heads Thales India, says India is a key market, both in defence and in the civilian areas of transportation, signalling, communications and automatic fare collection systems. Thales’ fare collection systems are installed on the Delhi Metro rail system.
"We are keen on growing our joint venture in India, Samtel Thales Avionics. Samtel has key capabilities, and the capability to grow. We do not rule out their becoming a part of our global supply chain… provided they develop the way that we would like them to develop," says Lenseigne.
So far, SDS's key technological breakthroughs, such as the Su-30MKI displays, have been achieved indigenously. But as it progresses to cutting-edge avionics the company requires technology infusion. For this, Samtel Thales Avionics, is a key vehicle.
An example of the futuristic avionics that SDS hopes to supply is the Infra Red Search and Track (IRST) System, standard kit in the Rafale as well as the Eurofighter Typhoon. This passive sensor detects enemy aircraft at ranges of 60-70 kilometres through the heat (infrared) they emit. Unlike a fighter's airborne radar, which gives away one's own position by emitting an electronic beam, an IRST is entirely stealthy, since it emits nothing.
Thales plans to offer the IRST to the IAF on a ‘Buy and Make (Indian)’ basis. This category of procurement (specified in the Defence Procurement Procedure of 2011, or DPP-2011) requires an Indian partner to absorb critical, high-end technologies and develop capabilities within India. Thales has told the IAF that Samtel Thales Avionics would do 50 per cent of the design and development work in India.
Both Samtel and Thales told Business Standard they would enhance Thales' share of the JV, if the foreign direct investment (FDI) limit is raised from the current 26 per cent. "If the FDI cap is raised to 49 per cent, we have agreed that Thales' holding in the JV will go up to 49 per cent, while we will come down to 51 per cent. This is not a written agreement, but we have an understanding," says Kaura.