HEADLINES:
May 31 2020
Indian aerospace component maker looks for private equity funding
01 September 2018

Huge orders expected in military aircraft segment on IAF’s demand: Aequs CEO

Aequs, an aerospace components maker and supplier of parts for the oil and gas industry, is looking at private equity partnerships to raise funds for expansion and plans to go public in the near future, said Aravind Melligeri, chairman and CEO.

“We are always looking at our position in the market and options to continue to increase the value to our business,” Mr. Melligeri said in an e-mail interview.

“This can involve private equity partnerships, which we have done in the other company I co-founded, QuEST Global Engineering. Of course, public listing may one day be considered,” he said.

India’s defence expenditure has increased at a CAGR of 9.7% from 2008-2016, reaching $42.83 billion in the fiscal year ended March 2018. The cumulative capital budget till the end of the 12th to 14th Five Year Plan (2012- 2027) for the Indian Air Force (IAF) is projected to be approximately $218 billion, out of which 69% is towards the acquisition of aircraft and aero engines, according to a report by the Confederation of Indian Industry.

The IAF will be spending about $150 billion on aircraft and aero engines in the next 15 years, which is expected to grow between 10% and 15% every year. “This indicates a large pipeline of orders in military aircraft segment, with a growing need for Indian sourcing partners,” he said.

Aequs, which specialises in forging, precision machining, sheet metal fabrication, surface treatments and assembly, has facilities in India, France and the U.S. These facilities make engine components, actuation systems, aerosystems and aerostructures for commercial, military and civil aircraft segments.

OEM customers

“We have a core group of strategic customers that include almost all major OEMs,” Mr. Melligeri said.

“India’s primary strengths lie in labour arbitrage — availability of a skilled talent pool and lower cost of labour. In order to cater to this demand, India needs to build trust among the global Original Equipment Manufacturers and that cannot happen overnight,” he said adding, “This will require building capabilities from scratch and convincing them that we can handle bigger orders.”

“The industry is witnessing an unprecedented backlog and we are all of the key commercial aircraft programmes that are fuelling that backlog,” Mr. Melligeri said. “Our contracts typically last an average of five years after which they are renewed and/or re-competed. We have seen a steady growth in our business over the past 10 years and we see that continuing.”

The company’s Indian operations have seen CAGR between 40% and 50% and “we expect that to continue. We are targeting $300 million by 2022,” the CEO said.

 

 

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