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Cover Feature

Bharat Dynamics Ltd Builds Dynamic India on flourishing defence business at home

Bharat Dynamics Ltd. (BDL) has built-in itself a world-class capability for manufacturing guided-arms and allied defence equipment beyond just being a contract base for manufacturing ATGM under India’s agreement with French, Russian or any other external organizations. It acquired a high level of technical prowess over the years it’s working with various organizations for manufacturing sophisticated guided weapons, meeting the changing necessities of armed forces and also through understanding their next-generation battlefield challenges. In fact, it has succeeded not only in systematically upgrading its skill-sets as a contract manufacturer of guided arms, but also in R&D driven innovation in defence equipment making. Through discreet pooling of India’s scientific, technological and corporate management strengths BDL stays at the vanguard of ensuring peace, contributing significantly to take India’s defence power to a crescendo.

Bharat Dynamics Ltd (BDL) made its capital market debut last year, making itself the world’s first missile maker to list on the bourses for public investments and better enterprise valuation. For Indian stock market the defence business is relatively a new sector, vastly diverse with huge entry barriers. Analysts, who are yet to work out the best earning ratio for defence stocks, are yet to make a dedicated study on the basis of product category and layout a standard-set for evaluating strengths of companies engaged in the sector in general. But they know, the defence sector offers potential and protected commercial opportunities with little competition from others in one’s core area of competence. The existing players like BDL has reached their present enviable position after decades of learning,trial and error procedures and experience of working closely with arms research organizations as well as with foreign state-owned arms makers.

The steady growth of BDL as a defence company and the secret of being a competitive player in the sector show its more than four and half decades of success in chasing of its goal to be a competent defence company with skills in its niche areas. The last four years saw its growth trajectory gaining more rapid pace fuelled by newer opportunities, changing policies and discreet management strategies for achieving better competitiveness, Mr Udaya Bhaskar, Chairman and Managing Director  mentions, while pointing at the company’s average compounded annual growth (CAGR) rate of around 40 per cent. Since 2014, the turnover size of the company more than doubled to Rs 4760 crore as at the end of March 2018, though the figure for the previous year was higher at Rs5062 crore. Going by the character of BDL’s business model and delivery nature,minor slippage in turnover on year-on-year (y-o-y) basis couldn’t be any indication of slackness in business or revenue slow-down trend. With an order book position of around Rs 12,000 crore having two-three years turnaround time for execution, analysts find no reason for upset in the company’s revenue for coming years. Mr Udaya Bhaskar also avers fact. Moreover, the Defence Procurement Policy 2016 and the government focus on Make in India, to which BDL has a proactive approach, would brighten its business prospects. “We are happy with the performance,”he adds while dwelling on the company’s present order book position. The huge order book position assures a steady stream of revenue, even if the turn around time stretches through different accounting periods. The government anticipates the company to perform at much higher rate nudging the management to put in extra efforts. “We take it in good spirit and work hard to reach the goal as best as possible,” he adds.   

BDL also has started exporting, though the management calls it a small size, compared with its present domestic turnover. The management expects orders from overseas markets to go up mainly because of the range of products it has in its portfolio. Indeed, a company of BDL’s stature with technical competitiveness and proven cost-efficiency, especially when India is increasing being accepted by the world as intellectually superior, there are vast opportunities for it in the days ahead, analysts point out.

Unlike most of the manufacturing sectors with plain vanilla products at their delivery end, the defence sector is driven largely by time demanding high value products, which are vulnerable to changes even during the course of production and delivery of products, based on changing threat perspective and the strengths of rivals. Yet, defence equipment manufacturers have niche market with long term supply arrangements with the buyers, who are essentially the armed forces. Hitherto, BDL has been largely implementing the projects conceived by Defence Research and Development Organisation (DRDO) without transferring technical know-how. That is only a timely commercial proposition. But with a determination to make it an integrated defence equipment manufacturing conglomerate it began to draw best available talents in various spheres, especially from respectable organizations like DRDO and aerospace industries. As Mr Udaya Bhaska points out, “today, BDL has strong research and development (R&D) base with strong talent pool within, capable of meeting every challenge.” Over the years of its close working with foreign arms makers and R&D driven institutions like DRDO, besides its own efforts to make it technically sound and understanding of the growing needs of armed forces, it could come as a true defence company with excellent R&D and delivery skills, he points out. In a way, it has built strong domain knowledge, acquired cutting edge technology prowess and achieved high level of operational competitiveness, he points out.   

It was set up 48 years ago under the Ministry of Defence as a domestic facility for manufacturing guided missiles and allied defence equipment.  In the beginning, it was focusing on production of first generation anti-tank guided missile (ATGM) called French SS11B1 on the licence agreement between the Government of India and French state-owned aerospace manufacturer, Aerospatiale. In the next stage, it embarked on production of second generation ATGMs of two variants; one named French MILAN-2 under the production licence and technical collaboration with Euromissile of France and second one named Russian Konkurs under similar arrangement with Tula KBP of the erstwhile Soviet Union. The production of these items for India’s infantry forces and transfer of technology in phased manner helped its engineers gain exposure into system engineering and designing concepts of anti-tank guided missiles.

While the missile development process continued in its efforts to contribute to the power of India’s forces on the battlefield, its close working with the original equipment manufacturers (OEMs) and armed forces enabled it to deliver new classes of ATGMs keeping phase with the change of time and new requirements. This is the sector where constant innovation is must to stay as a relevant arms manufacturer, he believes rightly. 

When India’s Integrated Guided Missile Programme (IGMP) started in the early ‘80s for developing and deploying indigenously built sophisticated missiles, BDL began to closely involve in the programme. It was the prime production agency, opening for it huge opportunities to assimilate advanced manufacturing and programme management technologies and skills.  The company also came up to DRDO’s needs of Concurrent Engineering Approach in the programme to meet all challenges concurrently and also to be competent partner in it. Today, it is one of the few companies in the world having capabilities to produce state-of-the-art guided weapon systems. BDL has been the lead integrator and producer of India’s Akash Weapon System (AWS) developed by DRDO. The system was successfully inducted three years ago raising India’s status to the elite club of surface-to-air missiles producing country in the world.

BDL has three manufacturing units, located at Hyderabad, Bhanur and Visakhapatnam. While the Hyderabad unit manufactures SAMs, Milan 2T ATGMs, countermeasures, launchers and test equipment, Bhanur unit manufactures Konkurs, INVAR (3 UBK 20), launchers and spares. Vishakapatnam unit manufactures of light weight torpedoes, the C-303 anti-torpedo system, countermeasures and spares. Two more units are coming up – one at Ibrahimpatnam, in Telangana and the other at Amravathi in Maharashtra. The Amravathi unit, at 530 acres, will make Very Short Range Air Defence Missile (VSHORAD). The Ibrahimpatnam Unit, at 630 acres, will manufacture Surface to Air Missile Defence Project.

Currently, the overall indigenization level at BDL is 70 per cent and the efforts are on to further improve the level, says Mr Udaya Bhaskar.  Ultimately, BDL will be a world class defence equipment manufacturer with capability to feed in India’s defence needs according to the rising threat perspective through deploying excellent Indian skills and resources. While being technically superior at every level, the management pays greater attention on cost competitiveness, as one of the thrust areas. From the vendor level to the final testing stage, BDL renders special care to stay cost competitive through a strategy of enablement.

With the aim of giving an impetus to the Make in India policy and to improve supply chain management to meet long term delivery commitments, BDL had implemented a vendor development policy in 2015. This has brought in transparency in identifying and developing new vendors. Also, as a committed national institution keen to maintain superior operating standard and management system, it looks beyond commercial gains and contributes to the enhancement of vendors’ competitiveness. It picks up technically qualified vendors and suppliers to timely delivery. It works with them side-by-side to make them capable of supplying import substitute items that is has identified. This will further enable the company achieve higher level of indigenization, Mr Udaya Bhaskar points out. The company has arrangement with various domestic and international OEMs for the development of its current and future products.

Indian OEMs andvendors are mostly small and medium enterprises (SMEs). As it understands the fact thatthe vendors also play their roles the company gives special focus on theirskill-upgradation and support at various levels or wherever they require it. “We hand-hold themand extend our support for achieving common goals of quality andcompetitiveness. Wherever possible we, as a company willing to strengthenrelationship with vendors, offer them our infrastructure so that they can bemore optimistic about executing their tasks. Since every division of BDL, including thematerial testing lab and electronic labs of each division, maintain world classstandard there could be many thing that the technocrat driven SME vendors couldlearn from it for their prosperity in business and future growth as competitivevendor for defence industry. This strategy helps the company stay with controlover vendors and support, to a great extent, benchmarking of productivity andmodernization of management system. After all, most of its products are singleshot devices, calling for superior quality and reliability, it has laid out qualitypolicies to ensure quality at every stage from basic input levels to therealization of the final product. By pooling India’s strength with a wisdom,BDL stays at the vanguard of ensuring peace and contributes to take India’sdefence power to a crescendo.  

In Nutshell

  • Building defence power for India
  • Pioneer in manufacturing anti-tank guided missiles
  • Production licence and technical collaboration with French and erstwhile Soviet aerospace companies rendered its engineers exposure into designing and system engineering of ATGMs and expertise
  • Major breakthrough came with IGMDP in the early ‘80s, working DRDO concurrently meeting all engineering tasks
  • Limited entry barrier for other players at present and in future, making its core areas of competence unrivalled
  • Long years of exposure in manufacturing anti-tank guided missiles, SAMs and under-water torpedoes
  • Strong domain knowledge gained through working closely with DRDO and foreign aerospace experts
  • Building economic value auguring well for preventing foreign exchange outflow and gradually earning foreign exchange revenue 
  • Constant process of upgradation on the basis of feedback from forces and in touch with OEMs helped BDL mechanize infantry forces and provide sharper teeth to the soldier on battlefield
  • Vast in-house training system for all verticals and operational streams
  • Admirable vendor development policy that enables it to strengthen relationship with OEMs, paving the way for better vendor higher indigenization level in future.

Products at a Glance

  • MILAN–2T: a portable second generation ATGM for infantry force to destroy tanks fitted with explosive reactive armour, moving and stationary.
  • FLAME: known as Fagot launcher Adapted to Milan Equipment is a portable cost effective launcher for firing MILAN missiles, easy to deploy. Operates on missile thermal battery. 
  • Konkurs–M: a second generation mechanized infantry ATGM to destroy armored vehicle equipped with explosive reactive armour, moving and stationary targets.
  • INVAR (Round 3UBK 20): a mechanized infantry weapon fired from the gun barrel of T90 tank to destroy armoured vehicles equipped with explosive reactive armour. 
  • NAG: a third Generation (fire and forget) mechanized infantry ATGM, with top attack capability to destroy armored vehicle equipped with explosive reactive armour with moving and stationary targets.
  • Akash Weapon System: an indigenously developed, an all-weather, air defence weapon system, uses a high explosive, pre-fragmented warhead that can engage multiple threats simultaneously.
  • Medium Range Surface-to-air Missiles (MRSAM): a high-response, quick-reaction, vertically-launched supersonic missile, designed to neutralize enemy aerial threats such as missiles, aircraft, guided bombs, helicopters, etc. Used by Army, Navy and Air Force as different variants
  • Light Weight Torpedo (TAL) – an electrically propelled, self-homing underwater weapon. With seawater activated battery in place it can be launched from ship or helicopter.
  • Varunastra or Heavy Weight Torpedo: a ship-launched, electrically-propelled underwater weapon is equipped with the most advanced automatic and remote controlled guidance system. Uses its own intelligence in tracing the target.
  • Submarine Fired Decoy: acts as a preferred target in presence of own submarine to a passive or active homing torpedo and can function as a preferred target. This offers zero response time for launching. Deployed from signal cartridge launch tube.
  • Counter Measures Dispensing System (CMDS): a state-of-the-art chaff and flare dispensing system, provides self-protection to the aircraft against radar guided and heat seeking missiles launched from air or ground.

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