Aerospace parts business the next growth driver

Mahesh Kulkarni & Praveen Bose / Bangalore September 14, 2010, 0:55 IST

India is set to import both passenger and military aircraft in large numbers, and SMEs have their eyes on orders that
could result from the offsets policy.

Small and medium enterprises (SMEs) here expect a substantial amount of business from units that will set up shop
in the aerospace special economic zone (SEZ) being developed by the Karnataka government near Bangalore
International Airport.

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Bangalore-based companies such as Bharat Fritz Werner (BFW), Ace Group and Kennametal India Limited (KIL) and
Rajkot-based Jyoti Huron are already supplying machining centres for making moulds, prototyping models, forging
dyes and precision mechanical parts to the aerospace sector.

Boeing estimates that India will need 1,000 commercial aircraft worth $100 billion over the next 20 years, while
PricewaterhouseCoopers estimates that India will spend $25 billion on commercial aircraft and $100 billion on
defence until 2014. This will drive growth for domestic components suppliers.

SMEs are looking to supply cutting tools for machining of structural parts and landing gear for Boeing and Airbus as
part of the offset facility the government provides. There is also an opportunity in cutting tools for the machining of
parts and engines of Sukhoi fighter jets manufactured by Hindustan Aeronautics Limited (HAL).

“The aerospace business was non-existent for us three years ago. It is in a nascent stage now. About 3 per cent of
our sales is from this sector, but we hope to grow this to double digits in the next two years,” said Santanoo Medhi,
KIL’s managing director.

The Karnataka government has acquired 1,000 acres near the Bangalore International Airport in Devanahalli for the
aerospace SEZ. About 55 per cent of the land will be allotted to companies for setting up factories.

Units in the SEZ will cater to domestic demand as well as the export market. The park will include aviation MRO
(maintenance, repair and overhaul) activities too.

So far, state-owned defence suppliers BEML Limited and HAL, Mahindra and Mahindra, Dynamatic Technologies
and Japan’s Amada have been allotted land. These companies are eyeing a substantial portion of the business
emerging out of the offset business opportunity.

Shrinivas Shirgurkar, managing director of the Ace Group, said, “The aerospace industry requires high-precision and
sophisticated components. Machine tool makers in India currently lack the technology and skill-sets to manufacture
such components. But, there are immense opportunities for us to meet these requirements and we look forward to
meeting them.”

The Indian Machine Tool Manufacturers’ Association (IMTMA) has urged the Central government to help the industry
set up a corpus fund to assist companies in adopting new technologies.
“We need to gear up with the latest technology and enhance the skills of our engineers to enable them to produce
sophisticated components for aerospace applications,” an IMTMA official said.

However, the aerospace industry requires unsophisticated parts as well, and SMEs in Bangalore (including his own
Ace Group) already supply some of these components and turning and milling machines to HAL.

Medhi of Kennametal said, “We are in talks with Spirit Aviation from the United States for the supply of cutting tools.
Spirit has an arrangement with Bangalore-based Dynamatic Technologies for outsourcing components like flap track
beams for the Airbus A320.”

Kennametal currently supplies cutting tools to HAL (which uses them to make parts for Sukhoi jets and helicopters)
and TAL, a joint venture between the Tata Group and Boeing (which uses them to make floor beams of the Boeing
787 Dreamliner).

Some of the SMEs that supply parts to HAL, other defence PSUs and the Indian Space Research Organisation (Isro)
have been set up by former employees of HAL and the Defence Research Development Organisation (DRDO).

“Opportunities are there. When the volumes will start flowing in is the moot question. It could become big when the
medium multi-role combat aircraft (MMRCA) project-related work starts,” an industry source said, adding that offsets
will be the biggest growth drivers for SMEs.

The National Centre of Aerospace and Innovation Research (NCAIR) is being set up at Indian Institute of
Technology, Bombay. To be sponsored jointly by the Department of Science and Technology and Boeing, NCAIR will
work on innovation and research on avionics and structures in order to build an ecosystem for the manufacture of
aerospace components.

Some 50 companies are expected to join and participate in projects. “Companies are expected to use it as a training
ground for young engineers to benefit the private and the government sector,” an official added.