Mumbai: Hyderabad-based Astra Microwave Products Ltd on Monday said it will build tactical radio communication systems, electronic warfare systems and signal intelligence systems jointly with Israel’s Rafael Advanced Defence Systems Ltd.

The two companies on Monday signed a term sheet to form a joint venture company, which will be based in Hyderabad. Business development activities are expected to start in the first half of 2016.

Astra Microwave designs, develops and manufactures sub-systems for radio frequency and microwave system used in defence, space, meteorology and telecommunication.

Rafael develops and manufactures advanced defence systems for Israeli defence and foreign customers. The company offers various products ranging from underwater systems through naval, ground, and air superiority systems to space systems.

“About $20 million is expected to be invested in the first two years in the joint venture company. To start with, Astra and Rafael will own 51:49 in the joint venture company and will become 50:50, subject to regulatory approvals," Astra Microwave said.

Prime Minister Narendra Modi’s emphasis on defence equipment manufacturing as part of his ‘Make in India’ initiative to encourage manufacturing and attract foreign investment has seen a scramble among companies for licences to manufacture defence equipment.

India will see a total defence budget allocation of $620 billion between fiscal years 2014 and 2022, of which 50% will be capital expenditure, according to a report released in February by lobby group Federation of Indian Chambers of Commerce and Industry (Ficci) and financial services company Centrum Capital Ltd.

The annual opportunity for Indian companies—both state-owned and private—is expected to touch $41 billion by fiscal year 2022 and $168 billion cumulatively, it said.

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