‘About ₹250-300 cr. is needed to complete orders in hand’

Alpha Design Technologies, a defence and space electronics equipment manufacturer, plans to sell shares to the public to fund new factories where it will make components for fighter aircraft and battle tanks, Col. (retd.) H.S. Shankar, CMD, said in an interview.

“SBI Caps has been appointed as the merchant banker for the sale, slated to happen around mid-2018,” Col. Shankar said. “The sale will result in a dilution of between five and 10% of the stake in the company.”

“An amount of ₹250-300 crore will be needed to complete the orders in hand and the percentage of dilution will depend on the valuation we get,” he said. “Our legal team is in place.” Its primary customers, directly or indirectly, are the Armed Forces and lately the Indian Space Research Organisation (ISRO). Currently spread across three premises in the city, Alpha plans a new common campus on five acres of land in Bengaluru. It has applied to the State Government for land approval.

Another five-acre manufacturing unit is due to come up in Devanahalli in north Bengaluru, he said. Alpha expects sales of ₹400 crore in the year ending March 2018, about 60% coming in from mandatory offsets accruing from the government’s military imports.

‘Pipeline of ₹3,338 crore’

“We have an order pipeline of ₹3,338 crore for the next three years,” Col. Shankar said. “Turnover in the next financial year is expected to be in the region of ₹ 600 crore.”

India, one of the world’s largest arms buyers, imports about $5.5 billion worth of military hardware, according to market research firm Enincon Consulting. More than 65% of equipment is imported.

In the government’s Make in India initiative for defence production, mid-sized enterprises such as Alpha Design and many small industries are projected as major beneficiaries.

The campaign for local make also allows public sector players and private industries alike to tie up with international giants. The larger goal is to significantly reduce the import burden around 25% in about five years by increasing the number of domestic manufacturers in the country’s defence market.

According to Enincon, global defence aerospace giants such as Dassault, Rafael and Airbus are projected to forge ventures with Indian players in order to set up local manufacturing and research bases. It said investments exceeding $1 trillion are likely to be made through tie-ups. It would also help smaller Indian firms to globalise as world-class supply chains come up around the manufacturing bases.

Alpha, with a staff of 900, mainly makes defence electronics, avionics besides antenna and and equipment for spacecraft. It has won - or bid for - a handful of projects to supply hardware and software for the Army and the Air Force. It is also working on programmes to modernise fighter aircraft and battle tanks.

In a new space

Last year, an Alpha Design-led consortium of six industries became the first Indian entity to train and assemble two navigation spacecraft with space agency ISRO.

Alpha said last month, it also bid for ISRO’s other proposal where it wants to outsource several future spacecraft to multiple industries.

Col. Shankar said the growth here looks so strong that “In two to three years we may need 900 people for just the space sector alone and earn business of ₹500 crore.”

Based on domestic and global opportunities it expects its new space business, now at 5% of turnover, to generate about 20% in its third year. “Space has just begun for us with a contract to build two satellites for ISRO,” he said.

Alpha also wants to build ground stations that are needed in some of the six regional countries. They became essential for receiving communication after the government shared the South Asia Satellite with neighbours.