NEW DELHI - In the biggest-ever order for India's private sector, Larsen & Toubro (L&T) has won a $700 million contract to produce 100 tracked 155mm howitzer guns at Indian facilities, jointly with Samsung of South Korea, for use by the Indian army.
The contract is likely to be inked with L&T in the next two months as all formalities are completed, said an official at the ministry of defense here.
The L&T-Samsung team, offering the K-9 Vajra-T gun, beat an offering for the 2S19 MSTA weapon from Rosoboronexport of Russia.
"More than 50 percent of the work share is with L&T," a senior L&T executive said. Samsung will supply the turret of the gun. The weapons will be produced at L&T's newly set up manufacturing facilities near Pune in central India.
Besides the 100 guns to be produced, the company hopes to close additional deals to boost what analysts say is a slim profit margin on a relatively small number of howitzers. "In case the gun is found attractive and the users [Indian Army] are happy with the performance of the supplied product, it is possible that the self-propelled wheeled program, which is also under planning stage, could get merged and this could increase the total numbers," one company executive said.
A senior Indian army official, however, said the 100 weapons are what's operationally required by the ground service, suggesting the number is unlikely to increase.
No executive from Samsung was available for comment.
Samsung may be hoping for a large market with at least 250 to 300 guns, says Rahul Bhonsle, retired army brigadier and defense analyst. Though the market size is about 250-300 for tracked guns in the long run, Bhonsle said "huge budgetary constraints" may leave the number at 100 in the near term.
Despite the big order for the L&T-Samsung team, the two companies are not committing to form a joint venture on an equity-sharing basis to execute the contract.
"There is no plan to have a JV formed as this is a one-off contract with no possibility of follow on orders. A JV can only be formed if there is a sustainable business plan with visibility of orders over future years," said one L&T executive.
"Competition in the 155 mm gun market is very tough," says Bhonsle. "As of now, Samsung is following a model of engaging with local partners for production or assembly of its gun platforms separately in each market. Thus, much will depend on how the K-9 venture rolls out for a matured partnership with L&T."
The tender for the tracked guns was released in 2011, which itself was a re-bid of an earlier tender from 2007 that was issued to India's Tata Power SED, L&T, Bharat Earth Movers Limited (BEML) and Rosoboronexport of Russia.
The Indian army plans to replace all existing field guns with a variety of 155mm weapons at a cost of more than $6 billion. As part of this purchase plan, named Field Artillery Rationalization Plan, the army plans to buy a mix of around 3,600 new guns by 2020-25 for over 220 of its artillery regiments.
Vivek Raghuvanshi is the India correspondent for Defense News.
