Dassault and Reliance ADAG cleared to form Rafale joint-venture in India

In late January, the Competition Commission of India cleared Dassault and Reliance Anil Dhirubhai Ambani Group (ADAG) to form a joint venture to lead the Indian Air Force’s (IAF) Rafale acquisition program.

The Government of India inked the USD $8.85 billion purchase of 36 Rafales in September, and in October, Dassault began implementing its portion of its offset commitments (to India) by announcing a partnership with Reliance ADAG.

Dassault Group and Reliance ADAG – specifically Reliance Aerostructure – will now build a 100-acre facility in Nagpur, which is expected to produce 1,500 jobs in the next seven years. As per the Press Trust of India, Reliance Aerostructure will own 51% of the facility, while Dassault with hold the remaining 49%.

Notes & Comments:

Roughly 50% of the value of the Rafale contract is to return to India through offsets, and while the $5.84 billion (for the Rafales and their maintenance package) also includes the engines and electronics, the airframe will still constitute a significant portion of the cost. Thus, Reliance ADAG will see a considerable amount of work and – if not already – it will become a serious domestic competitor to Tata Group, whose growth was carried by India’s offset agreements with Boeing.

With Dassault and Reliance ADAG on one end and Tata Group and Boeing on the other, the Indian Navy’s forthcoming competition for 57 multi-role carrier-borne fighters (MRCBF) should be very competitive. Both Dassault and Boeing have a directly addressable market, and in turn, both companies have ready-to-operate Indian partners to execute offset promises. A third competitor in the naval requirement is difficult to envision, especially as they lack the industry footprint and the credibility with the armed forces.