India Defence & Security Report Q2 2010

Company Profiles

BAE-HAL Software Ltd

Company Overview BAE-HAL is a joint venture (JV) between HAL, Asia’s largest manufacturer of aircraft, and BAE
Systems, one of the largest aerospace and defence companies worldwide. The JV was
established in 1993 with the objective of providing high-quality and cost-effective software
services and solutions for the aerospace and defence industries across the world.

The company has six different divisions: Real-Time Systems Simulation, Simulations, EAG,
DBMS, Content Creation, and Engineering Services.

The Real-Time Systems Division is BAE-HAL’s largest group and has carried out a number of
projects for aerospace applications over the years. These include the development of full life-
cycle software projects and independent verification and validation. This division also has
expertise in automatic test equipment.

The simulation unit provides state-of-the-art, cost-effective simulator solutions required for the
training and maintenance of aerospace and defence systems. This division was part of a
consortium that upgraded 21 out of the 39 aircraft sub-systems for the Indian Navy’s simulator for
the Sea Harrier Jump Jet. It has also developed Cockpit Procedure Trainers for the MiG series of
aircraft.

The Content Creation Division offers products and services in multimedia, digital documentation
and web technologies. It has developed products for HAL, Bharat Electronics, Rolls-Royce and
the Indian armed forces.

The company’s other, smaller units are the Engineering Services Group, which supplies services
in computer-aided design applications; the Enterprise Applications Division, which provides
enterprise solutions for aerospace and defence applications; and the Database Management
Division, which has in the past provided database management solutions for British Airways.

Aviation and Aerospace magazine reported in February 2010 that the relationship between HAL
and BAE had deteriorated. BAE Systems may be required to pay around US$10.5mn to cover
costs incurred by HAL in retooling and redesigning equipment in order to be able to assemble the
Hawk AJTs in India.

Financial Highlights In the 2008/09 financial year BEL posted net sales and income from operations of INR48.1bn
(US$1bn). Its net profit from ordinary activities after tax was INR7.5bn (US$156m). Net sales in
the April-June quarter of 2009 were INR9.1bn (US$190bn), a third higher than the previous
corresponding period.

Key Statistics ƒ No. of employees: 160

ƒ Year established: 1993

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Key Personnel ƒ CEO: C Subramanian

Contact Details ƒ BAeHAL Software Ltd

HAL Estate
Airport Lane
Airport Road
Bangalore 560 017
India

ƒ Tel: +91 (80) 2522 5418, 2522 6332

ƒ Fax: +91 (80) 2522 0915

ƒ marketing@baehal.com

ƒ www.baehal.com

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Bharat Dynamics Ltd (BDL)

Company Overview Established by the Indian Ministry of Defence in 1970 to manufacture guided missiles, BDL is
currently the only Indian agency that manufactures missiles. It has two manufacturing units, both
located in Andhra Pradesh, with one at Kanchanbagh, south of Hyderabad, and the other at
Bhanur (Bhanoor) in Medak District, north of Hyderabad.

BDL’s first project was the production of the Anti-Tank Guided Missile (ATGM) SS11 B1 in
collaboration with France’s Aerospatiale. The production of the second-generation ATGM, known
as Milan, in collaboration with France’s Euromissile, started in 1985. Meanwhile, in 1989, the
company started manufacturing Konkurs ATGM under a licence agreement from the former
Soviet Union.

BDL now has a fully fledged design and engineering division for developing and updating
products required by the Indian army. Some of the products that have been developed by BDL
include the Flame Launcher, ATGM Simulator and the JATO Booster.

The company’s main product focus is now on the manufacture and supply of missiles including
anti-tank missiles, guided missiles, and ballistic missiles. The company’s two main missile models
are the aforementioned Milan and Konkurs. The development of the Agni series of ballistic
missiles has allowed the company to gain a contract to produce the Agni 1A short-range version
of the intermediate-range delivery vehicle. The announcement was made in July 2004, following a
successful test launch of the missile.

Hindi Business Line reported in February 2010 that the company will produce the Agni-III, India's
long range, nuclear-capable missile, which had passed its security and test flights.

Financial Highlights In the 2008/09 financial year BEL posted net sales and income from operations of INR48.1bn
(US$1bn). Its net profit from ordinary activities after tax was INR7.5bn (US$156m). Net sales in
the April-June quarter of 2009 were INR9.1bn (US$190bn), a third higher than the previous
corresponding period.

Key Statistics ƒ No. of employees: 3,120

ƒ Year established: 1970

Contact Details ƒ Bharat Dynamics

Kanchanbagh Post
Hyderabad 826 005
India

ƒ Tel: +91 (40) 2434 0081

ƒ Fax: +91 (40) 2434 0660

ƒ http://bdl.ap.nic.in/

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Bharat Electronics Ltd (BEL)

Company Overview BEL was established in 1954 to meet the defence needs of the Indian government with its focus
on the design, development and manufacture of sophisticated, state-of-the art electronic
equipment for the use of Indian Defence Services and paramilitary organisations. Nowadays,
however, BEL is the country’s premier electronics firm, with nine manufacturing units located at
Bangalore, Madras, Hyderabad, Machilipatnam, Pune, Taloja, Panchkula, Ghaziabad and
Kotdwara. The firm has its headquarters in Bangalore. Three of BEL’s plants, those located in
Bangalore, Hyderabad and Ghaziabad, were included in the list of Indian entities that were
subjected to US sanctions announced after the May 1998 nuclear tests. These units have faced
passive sanctions from some European countries in the last few years.

BEL has a wide product portfolio including more than 350 products. The company is India’s sole
manufacturer of radar, sensors, sonars and the complete range of antennae for defence
surveillance for ground, air and naval use. It produces sophisticated simulators and trainers, gun-
fire control and stabilisation systems, and optical and opto-electronic passive night vision devices.
In terms of communications equipment, BEL manufactures for the Indian armed forces high-
frequency (HF), very high-frequency (VHF) and ultra high-frequency (UHF) manpacks, mobile and
static transceivers and transmitters of various capacities, radio relays, digital troposcatter systems
and secure voice and data equipment and digital switching systems. For naval communications,
BEL makes ship-borne transmitters and receivers, display and console systems and ESM and
ECM electronic warfare systems for various platforms. Among the devices it makes for the air
force are satcom systems and shelter-based tactical secure air support communication packages.
In June 2008, BEL opened a new facility for the production of large-scale land-based Electronic
Warfare (EW) systems in Hyderabad.

Approximately 65% of BEL’s turnover comes from indigenous designs, with the remainder coming
from foreign technology transfers. In the last year alone, BEL signed collaboration agreements
with several major manufacturers, including Oerlikon Contraves of Switzerland, Northrop
Grumman of the US, ELTA of Israel, Matra Defence Equipments & Systems of France, and
Norcontrol of Norway. BEL is a key exporter, in particular of defence communication products,
exported to Algeria, Botswana, Brazil, France, Germany, Malaysia, Mauritius, Russia, Sweden,
Switzerland and the UK.

In February 2010, The Hindu reported that an intelligence satellite equipped with sensors to pick
up conversations and detect espionage activities is being developed by the Defence Research
and Development Organisation (DRDO) and the Indian Space Research Organisation (ISRO).
BEL will manufacture the radars. BEL Director (R & D) I.V. Sarma is reported to have said that in
the next decade, the business potential for BEL is expected to grow to INR22.5mn for the
manufacturing of electronic warfare systems for the Indian armed forces.

Financial Highlights In the 2008/09 financial year BEL posted net sales and income from operations of INR48.1bn
(US$1bn). Its net profit from ordinary activities after tax was INR7.5bn (US$156m). Net sales in
the April-June quarter of 2009 were INR9.1bn (US$190bn), a third higher than the previous

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corresponding period.

Key Statistics ƒ Annual sales volume: US$1bn

ƒ No. of employees: 14,180

ƒ Year established: 1954

Key Personnel ƒ Chairman and managing director: Ashwani Kumar Datt

ƒ Director (personnel): M L Shanmukh

ƒ Director (finance): M.G. Raghuveer

ƒ Director (Bangalore complex): H S Bhadoria

Contact Details ƒ Bharat Electronics Ltd

Corporate Office
Outer Ring Road
Nagavara
Bangalore 560045
India

ƒ Tel: +91 (80) 2503 9300

ƒ Fax: +91 (80) 2503 9305

ƒ www.bel-india.com

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Hindustan Aeronautics Limited (HAL)

Strengths ƒ Main aerospace contractor for the Indian Air Force (IAF).

ƒ Strong links with overseas firms.

ƒ Varied competencies and facilities, from repair to design and manufacture of helicopters
and aircraft.

Weaknesses ƒ Poor research facilities, reflected by the protracted development process of the light
combat aircraft.

ƒ The enterprise is administered by the state, restricting private involvement

ƒ Export levels are currently low.

Opportunities ƒ Development of new systems such as the advanced light helicopter and light combat
aircraft offer export possibilities.

ƒ The recent Hawk deal signed by the Indian government should result in lucrative, long-
term sub-contraction deals and technology transfers from co-production.

ƒ Established and recently announced joint ventures (JVs) and overseas deals should
increase HAL’s international presence.

Threats ƒ Increased competition from China’s burgeoning aerospace sector, particularly the
development of the JF-17 Thunder in collaboration with Pakistan.

ƒ Concentration on the Indian government as a client could constrain HAL’s international

ambitions.

ƒ Danger of becoming a metal-basher if investment is not obtained for research and

development (R&D).

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Company Overview HAL was rated 58 out of the 100 largest arms-producing companies (excluding China) in 2003,
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up from 62 the previous year, according to figures published by the Stockholm International
Peace Research Institute (SIPRI). Arms sales increased from US$510mn to US$650mn in the
same period, comprising 80% of total sales and profits of US$129mn in 2003. In FY05, HAL’s
dividend was just over INR100mn.

HAL was established in October 1964 following the merger of Hindustan Aircraft and Aeronautics
India. The company’s core business is the design, development, manufacture, repair and
overhaul of aircraft, helicopters, engines and their accessories. HAL also manufactures structural
components for satellites and launch vehicles. Headquartered in Bangalore, the company has 12
divisions located in six Indian states.

In September 2008, MS Nadgir was appointed as the new director for design and development.
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His appointment comes at a time when HAL has been climbing up the rankings, and is now 51 in
a list of the top 100 defence companies in the world produced by the US-based magazine
Defense News. This improvement is due in large part to modernisation programmes and

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helicopter marketing strategies. HAL is also ranked fourth in the Asia Pacific region.

Over the past 39 years, HAL has built around 3,000 aircraft, of which 95% were manufactured for
the air force. These 3,000 planes comprised 20 different models, 11 of which were of indigenous
design. Meanwhile, the Helicopter Division has produced over 600 helicopters (under French
licence), and in the 1990s it developed its own helicopter model, the ALH.

HAL and French company Snecma have signed a JV agreement. The JV company aims to
become a centre for excellence for the manufacture of key components and assembly of aero-
engines. This will provide HAL with an opportunity to become a major player in the aero-engine
industry. The company began operating in early 2006 in Bangalore.

HAL has been licensed to manufacture the Su-30MKI aircraft and its components for the Indian
Air Force. To this end, HAL is investing approximately INR 32.5bn (US$717.3mn) over the next
three years in its Nasik plant in preparation for the production of the Su-30MKI. The Sukhoi Su-
30MKIII fighter has gained military certification from Russia and India. It is to be built under
licence in India at the HAL complex, with 140 platforms to be manufactured by 2017. The
agreement was valued at US$5bn. Development of a pilotless target aircraft has been completed,
and HAL is now awaiting orders for the delivery of the system.

The development of indigenous defence industrial contracts should benefit HAL in the near future.
The aircraft carrier/air defence ship programme should see HAL build four General Electric
LM2500 gas turbines under licence.

In February 2010, the company announced that their joint venture company with CAE – the
Helicopter Academy to Train by Simulation of Flying (HATSOFF) – was progressing on-schedule
to open mid-2010 and will provide India’s first Level-D helicopter simulator training facility.

Financial Highlights HAL’s sales were up 20% year-on-year (y-o-y) in 2008/09 (April-March) at INR103.7bn
(US$2.2bn). Profits before tax were INR23.4bn (US$488m), up 7.9%, while after-tax profit was
INR17.4bn (US$363bn), up 6.62%.

Financial Statistics ƒ Annual sales volume: US$2.2bn.

ƒ No. of employees: 35,000.

ƒ Year established: 1964.

Key Personnel ƒ Chairman: Ashok Nayak.

ƒ Director of finance: D Shivamurti.

ƒ Director of design and development: M S Nadgir.

Contact Details ƒ HAL Corporate Office

15/1 Cubbon Road
Bangalore 560 001

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India

ƒ Tel: +91 (80) 2286 6701, 2286 6902-08

ƒ www.hal-india.com

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Honeywell International India

Company Overview Established as a 100% Honeywell-owned subsidiary in 1995, Honeywell International India (HII)
specialises in the manufacture of industrial process controls and precision components for the
aerospace and defence industries. The company’s Indian unit also manufactures computer
equipment for the environmental control of all types of buildings. HII also has two manufacturing
units: Metglass Solutions, which caters to the world market with post-cast amorphous metal
products; and, System Sensor India (SSI), the first global smoke and heat detector manufacturer
to invest in the country. Within the Indian defence sector, HII provides support to the IAF and
HAL, as well as India’s Defence Research and Development Organisations.

In May 2009, Honeywell (NYSE: HON) chairman and CEO, Dave Cote, opened a new US$50mn
research, development and engineering facility in Bangalore. It is Honeywell’s second research
and development (R&D) centre in the city. The new facility will accommodate 3,000 people and
features laboratory facilities, simulators, and a training centre.

Cote said that India was an integral part of Honeywell’s global growth strategy, as a
manufacturing location, export hub and as a centre of engineering and R&D excellence. He said
Honeywell’s presence in India has grown from 1,000 employees in 2002 to more than 10,000.

In February 2009, Honeywell announced that it plans to produce the military version of its Traffic
Collision Alerting System and other key safety and mechanical systems for the Indian Air Force’s
C-130J transport planes. The Indian Air Force C-130J will also operate with other Honeywell
avionics, mechanical and lighting systems and components.

In November 2009, the company announced plants to establish a new technology center in
Gurgaon, India, to expand its global research capabilities in refining, petrochemical and other
technologies in order to better serve customers in the region. The US$34mn investment will
establish a 400,000 square-foot centre at an existing Honeywell-owned property. The centre will
primarily house pilot plants for developing and demonstrating refining and petrochemical process
technology developed by UOP, a Honeywell subsidiary that is part of Honeywell’s Specialty
Materials business group.

Key Figures ƒ Year established: 1995.

ƒ No. of employees: 10,000+.

Key Personnel ƒ India president: Anil P. Gupta.

Contact Details ƒ Honeywell International

First floor
Unitech Trade Centre
Sector 43, Block C
Sushant Lok, Phase I
Gurgaon 12200

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Haryana
India

ƒ Tel: +91 (124) 671 5000

ƒ Fax: +91 (124) 671 5014

ƒ www.honeywell.com/sites/india

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Ordnance Factories (OF)

Company Overview By far India’s largest arms manufacturer, the OF group comprises a total of 39 factories across
the country. These factories are grouped into five different divisions: ammunitions and explosives,
weapons, vehicles and equipment, armoured vehicles, and ordnance equipment. Management of
the company is attributed to the Ordnance Factory Board, which functions under the auspices of
the Indian Department of Defence Production and Supplies. OF employs nearly 150,000 workers
countrywide, with 10 factories in Maharashtra and Uttar Pradesh, six in Madhya Pradesh and
Tamil Nadu, four in West Bengal and one each in Andhra Pradesh, Orissa and Chandigarh.
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OF was rated 35 out of the 100 largest arms-producing companies (excluding China) in 2003,
according to figures published by SIPRI. Arms sales increased from US$1.18bn to US$1.21bn in
this period. Arms sales accounted for 85% of total company sales.

The prime customers of OF are the Indian armed forces. However, the company has set as an
‘important objective’ the expansion of its export volume.

In December 2009, the company was reported to be in discussions with Israeli companies for
provision of arms.

Financial Highlights HAL’s sales were up 20% y-o-y in 2008/09 (April-March) at INR103.7bn (US$2.2bn). Profits
before tax were INR23.4bn (US$488m), up 7.9%, while after-tax profit was INR17.4bn
(US$363bn), up 6.62%.

Key Statistics ƒ No. of employees: 130,000.

Key Personnel ƒ Chairman: Saroj Vinayek.

Contact Details ƒ Ordnance Factories Board

10A Auckland Road
Kolkata
India

ƒ www.ofbindia.gov.in

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Rolls-Royce International
Company Overview Rolls-Royce has had a presence in India for the past six decades, offering a wide range of
products in the defence and commercial aeronautical sectors as well as in the marine and energy
sectors. The UK-based aero-engine giant does not have its own manufacturing plant in India, but
it has a long-standing licence agreement with HAL under which the Indian aircraft manufacturer
builds and repairs Rolls-Royce’s engines. The relationship continues to flourish, with HAL
partnering Rolls-Royce on the AJT’s Adour Mk871 engine. HAL is producing over 44 of the
engines at its facility in Bangalore, where it has been producing Adour Mk811 engines for the
Jaguar since 1981.
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Rolls-Royce celebrated the 75 anniversary of its partnership with the Indian Air Force in 2008, a
milestone that coincided with the induction of the latest Hawk Advanced Jet Trainers in India –
powered by Rolls-Royce engines.

Rolls-Royce expects to make more investments in manufacturing, design and software

development related to aircraft engines in India.

In January 2009, the company announced a contract to provide six engines to power an
extension to one of India’s major gas pipelines in a deal with Gas Authority India Limited (GAIL)
valued at US$130mn.

Address ƒ Rolls-Royce India Ltd

Second floor
Birla Tower (West)
25 Barakhambha Road
New Delhi 110001
India

ƒ Tel: +91 (11) 2335 7118

ƒ Fax: +91 (11) 2335 7117

ƒ india.regional.office@rolls-royce.com

ƒ www.rolls-royce.com/india/default/htm

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