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Punj Lloyd expects to bag Rs 400-crore defence order 

The Economic Times , Aug 25, 2016

Punj Lloyd expects to bag its maiden defence order for upgrading Zu23 air defence guns worth Rs 400 crore in a month's time, a top executive from the company told ET.

In July 2015, the company had informed bourses that its proposal for upgrading the Zu23 air defence gun was shortlisted by the Ministry of Defence. The company has emerged the best bidder and expects final award of order soon.

"We diversified into defence in 2006 but have only done small component jobs. We hope to receive the Zu23 order in a month. Our products have been tried, tested and approved so we expect more big order to come now," Ashok Wadhawan, president, manufacturing, Punj Lloyd, told ET.

Punj Lloyd, traditionally an infrastructure project company, diversified into manufacturing by investing Rs 200 crore in setting up a manufacturing unit near Gwalior for fabrication and assembly facility for defence systems, primarily guns. "The six year cycle is getting over and we are in the final stages of signing contracts. This would give a big jump to order book. Defence may grow to be 20% of our group's total order book in the next 2 years," Wadhawan said.

Punj Lloyd has formed a 51:49 joint venture with Israel Weapon Industries (IWI) for manufacture of arms. IWI has in the past supplied guns such as TAVOR assault rifles and UZI SMG to security forces in India and the company has other major programs in which its small arms are undergoing trials.

"Our focus area is guns. We have one joint venture for small arms and now we will look at JVs in other segments of arms. We are working on technology on our own but we will look at more joint ventures since technology is available globally," he said.

According to a study by Federation of Indian Chambers of Commerce and Industry and Centrum Capital, Indian government will spend $620 billion between 2014 and 2022 on defence, of which half will be capital expenditure. Several private sector players such as the Mahindra Group, Bharat Forge, Larsen & Toubro, Reliance Industries, Tata Group, Reliance Group and Adani Group have entered the space to grab a share of the orders.

"The government's reform in defence is taking off but the cycle time is too long. So the impact of the fundamental changes undertaken by government are yet not visible on the ground. It may take another 5-6 years to show results," Wadhawan said.

Punj Lloyd, which saw its order book shrinking due to the slowdown in the infrastructure sector, has diversified into new businesses like defence and power transmission and distribution to keep its order book ticking.