Business Line reported that Mahindra and Mahindra has decided to seek clarification from the Government on why the Foreign Investment Promotion Board had rejected its proposal to enter into a JV with Rafael Advanced Defense Systems of Israel.
The proposed investment of around USD 18.2 million to develop and manufacture naval systems also remains scuttled.
Both the companies have said they are keen to establish a JV in the country.
In March last year, M&M and Rafael Advanced Defense Systems, a manufacturer of high tech defense systems for air, land, sea and space applications, signed an MoU in preparation for a JV company in India. The venture was to develop and manufacture anti torpedo defense systems, electronic warfare systems, advanced armoring solutions and remotely operated weapon stations for futuristic infantry combat vehicles, amongst others.
The companies had approached FIPB in March, for approval of the development and production of naval system products, and for the creation of a 74:26 JV company.
However, the FIPB rejected the proposal, without assigning any reason. An official close to the situation, on condition of anonymity, said that on the basis of the JV, Rafael was to make investments in Mahindra’s existing naval systems division in Pune. Talks were also on to set up a production facility at the same location, which would enable the company meet long-term requirements of the proposed JV.
The official added that Rafael was established as part of the Israeli Ministry of Defense more than 60 years ago. The company’s technology is embedded in almost all the Israel Defense Forces systems in operation today.
The companies in a statement said that “Both Mahindra and Rafael are surprised and disappointed at this decision, as both are reputed companies which have extensive engagement with the Government of India on projects related to defense and homeland security. Mahindra and Rafael shall continue exploring ways towards the establishment of a JV.”
