Not state-of-art, but modern tech in defence will be key: Cimmco

JP Chowdhary CEO, CIMMCO believes with easing of the policy and changing the terminology from 'state-of-art' to 'modern technologies', is likely to pave way for the already interested investors to come in.

The government on Monday eased the policy to allow beyond 49 percent foreign direct investment (FDI) in defence sector under government approval route. It has done away with the condition of access to 'state-of-art' technology and has modified it to 'modern or for other reasons'. This move is with an aim to boost investments in the defence sector.

JP Chowdhary CEO,  Cimmco believes with easing of the policy and changing the terminology from 'state-of-art' to 'modern technologies', it is likely to pave the way for the already interested investors to come in. The comapny is already in talks with strategic investors, he said.

Cimmco is already into defence jobs as a sub-contractor to Titagarh Wagons .

Talking on the business outlook, he said the company's orderbook is around Rs 200-300 crore.

The industrial licences are currently held in the name of the listed entity, he said.

The company is a public limited company in private sector having installed capacity for manufacturing of wagons, coaches, underframe 2240 Vehicular Units (VUs) and Industrial Machinery 14200 MT per annum and comes under a large industrial unit.

Below is the verbatim transcript of JP Chowdhary's interview with Latha Venkatesh and Nigel D'Souza on CNBC-TV18.

Latha: Do you see a lot of foreign interest. Have you all reached out to anybody?

A: Yes, we have been talking to various people who were worried about their technology IPR being diluted. They wanted majority beyond 51 percent. Most of them would hankering for 74 percent, nobody thought of going up to 100 percent. So what the government has done is a very intelligent way of linkages no automatic approval beyond 49 percent, beyond 49 pe rcent it would be only case to case basis and while taking a decision the government is expected to find out what you decide whether it is a state of the art technology or is a modern technology or whatever it is. As you rightly said that that there was a differential in the terminology, earlier state of art is mentioned as a part of the policy, but state of art is not defined anywhere. Should this could lead to lot of complication and that's why they were staying back.

Latha: So the parties you were speaking to, you believe that they will qualify for modern technology definition?

A: Yes.

Latha: So expect foreign direct investment (FDI) shortly with your own group as strategic partner.

A: It is difficult to say how things work out, but the possibility is very strongly there not only in our case, but also in other case.

Nige l: There is interest that's coming in as you are telling us. How much of for what stake. We have been joined by few managements, they have been talking about 26 percent, 51 percent stake, if in case you are in negotiations with any investors then what kind of a stake will you be looking to offload to them.

A: It all depends on the size of the cake. If it is an item which involves huge involvement then we would be very happy with smaller stake so incommensurate with our size and our investing capacity, we will look for a suitable stake.

Latha: Does defence forms any part of your revenue now?

A: Cimmco is already doing some defence jobs as a subcontractor to Titagarh and in their own right we are just waiting for some positive thing to take place and we expect now thing will start moving.

Nigel: What's your order book? Could you tell us that, rough order book?

A: I will not be able to tell you exact figure, but it will be between Rs 200-300 crore.

Latha: Will you be doing a JV directly with listed Cimmco or will you hiving off the defence business and doing a separate JV with whomever you are speaking with.

A: It will be in the Cimmco. No concrete proposal as of today, but we have in mind the industrialisation stands in the name of Cimmco, so we will do it in the name of Cimmco only.

Nigel: Can you tell us in the listed company, Cimmco do you have any land bank because there are various rumours that are going around. Do you have any land bank?

A: We have quite sufficient land at Bharatpur.

Nigel: What is the size and could you give us a value?

A: It is a 200 acre land and of course land and industries you can't value it as a land, it is the part of the industrial asset.

Nigel: At Bharatpur right?

A: Yes.

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