New Delhi: India should consider making rules easier for foreign companies to fully own local units in the defence sector, said Patrice Caine, chief executive of French military, avionics and cybersecurity software group Thales.
“Countries like France, Australia and the UK — they make a clear distinction between protecting intellectual property and economic rights. They don’t care who owns the company as long as the intellectual property is protected by them,” he told ET in an interview. “Perhaps this will evolve in India.”
India allows 100% foreign investment in the defence sector. While investment up to 74% in a joint venture with a local company requires no prior government approval under the automatic route, the process for a foreign investor to hold a stake beyond that is complex and requires multiple government clearances.
The government has been extremely cautious on allowing full ownership for foreign companies in this strategic sector. Sweden’s Saab is probably the only foreign company that has so far received New Delhi’s approval for a fully owned local subsidiary, to make anti-tank weapons under an estimated `500-crore project.
Meanwhile, Indian conglomerates have entered the sector in partnerships with foreign companies, including Thales.
Thales CEO talks of ‘magic triangle’
These companies include Reliance Industries, Tata, Adani Group and Mahindra, as the government pushes for boosting local participation in defence supplies for the Indian armed forces as well as for exports.
Caine, who was in India on a short visit, sought to dispel concerns about a foreign company having full ownership of a local defence unit. “I do challenge the notion of an Indian company because our India unit, Thales India, is very much an Indian company. It is based in India. People working in the company are Indian citizens,” he said.
Thales is currently following a mixed model of joint ventures and a few wholly owned activities to satisfy the sovereignty requirements in India. Caine said such a model is lengthier, as this involves overseas companies to tie up with a local partner.
“This is probably a model that takes more time in terms of how to access sovereignty, because it's obviously less fluid to organise, I would say, or to align interests between two groups than with your own subsidiary,” he said.
In 2017, the company formed a joint venture with Anil Ambani’s Reliance Defence to integrate and maintain radars and manufacture high performance airborne electronics. This was part of an offset deal between France and India for the supply of Rafale fighter aircraft to the Indian Air Force.
In June last year, it tied up with Adani Defence & Aerospace to manufacture 70mm rockets by setting up facilities for assembly and testing in India.
Caine’s call for liberalising rules comes also as India increases defence spending following a military conflict with Pakistan early this year. He signalled a major escalation in Thales’ India strategy, as it plans to expand local engineering operations and co-develop highend avionics for global platforms.
“India has become a centre of excellence hub, in many domains to serve our worldwide markets. It's not only just Make in India for us but it is make India innovate in India and export from India. It's really kind of a magic triangle, if I may say, make India innovate in India and explore from India,” Caine said. “This magic triangle,” he said, makes India a strategic destination for Thales.
The company’s Indian subsidiary is co-developing a new flight management system for Airbus aircraft. In March, it opened an avionics maintenance, repair and overhaul unit near the Delhi airport for servicing carriers including IndiGo and other major airlines, which Caine said is a shift from having regional hubs to conducting on-shore servicing.
Caine expects higher defence spending from major European countries as geopolitical tensions flare up across the world. The company raised its 2025 sales growth forecast after posting higher first-half sales and profit, amid an increase in military spending in Europe
“Countries like France, Australia and the UK — they make a clear distinction between protecting intellectual property and economic rights. They don’t care who owns the company as long as the intellectual property is protected by them,” he told ET in an interview. “Perhaps this will evolve in India.”
India allows 100% foreign investment in the defence sector. While investment up to 74% in a joint venture with a local company requires no prior government approval under the automatic route, the process for a foreign investor to hold a stake beyond that is complex and requires multiple government clearances.
The government has been extremely cautious on allowing full ownership for foreign companies in this strategic sector. Sweden’s Saab is probably the only foreign company that has so far received New Delhi’s approval for a fully owned local subsidiary, to make anti-tank weapons under an estimated `500-crore project.
Meanwhile, Indian conglomerates have entered the sector in partnerships with foreign companies, including Thales.
Thales CEO talks of ‘magic triangle’
These companies include Reliance Industries, Tata, Adani Group and Mahindra, as the government pushes for boosting local participation in defence supplies for the Indian armed forces as well as for exports.
Caine, who was in India on a short visit, sought to dispel concerns about a foreign company having full ownership of a local defence unit. “I do challenge the notion of an Indian company because our India unit, Thales India, is very much an Indian company. It is based in India. People working in the company are Indian citizens,” he said.
Thales is currently following a mixed model of joint ventures and a few wholly owned activities to satisfy the sovereignty requirements in India. Caine said such a model is lengthier, as this involves overseas companies to tie up with a local partner.
“This is probably a model that takes more time in terms of how to access sovereignty, because it's obviously less fluid to organise, I would say, or to align interests between two groups than with your own subsidiary,” he said.
In 2017, the company formed a joint venture with Anil Ambani’s Reliance Defence to integrate and maintain radars and manufacture high performance airborne electronics. This was part of an offset deal between France and India for the supply of Rafale fighter aircraft to the Indian Air Force.
In June last year, it tied up with Adani Defence & Aerospace to manufacture 70mm rockets by setting up facilities for assembly and testing in India.
Caine’s call for liberalising rules comes also as India increases defence spending following a military conflict with Pakistan early this year. He signalled a major escalation in Thales’ India strategy, as it plans to expand local engineering operations and co-develop highend avionics for global platforms.
“India has become a centre of excellence hub, in many domains to serve our worldwide markets. It's not only just Make in India for us but it is make India innovate in India and export from India. It's really kind of a magic triangle, if I may say, make India innovate in India and explore from India,” Caine said. “This magic triangle,” he said, makes India a strategic destination for Thales.
The company’s Indian subsidiary is co-developing a new flight management system for Airbus aircraft. In March, it opened an avionics maintenance, repair and overhaul unit near the Delhi airport for servicing carriers including IndiGo and other major airlines, which Caine said is a shift from having regional hubs to conducting on-shore servicing.
Caine expects higher defence spending from major European countries as geopolitical tensions flare up across the world. The company raised its 2025 sales growth forecast after posting higher first-half sales and profit, amid an increase in military spending in Europe
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