Swedish defence and security company SAAB has signed a memorandum of understanding (MoU) with Pipavav Defence and Offshore Engineering Co Ltd for a strategic investment of SEK 250 million ($38 million or around Rs 210 crore) in the Indian company.
According to the MoU, the investment by SAAB would be through a suitable structure, subject to all necessary approvals, during the coming months. It did not provide details of the proposed structure, but if the money is invested in the public-listed parent company (instead of a subsidiary or a new joint venture), SAAB would get to pick equity or equity convertible warrants worth 4.7 per cent stake, based on the current share price of Pipavav Defence, as per VCCircle estimates.
SAAB has also signed a technical partnership agreement (TPA) with the Indian firm for further co-operation and relevant projects. The partnership will enable SAAB to increase its presence in the Indian market, which now allows private investment in the defence business.
“This agreement has the potential of offering new business opportunities for SAAB’s naval offer and we welcome the possibilities this presents to further develop our offering to a global market,” said Jan Widerström of SAAB.
Earlier, the two companies had jointly formed the Combat System Engineering group, which analyses naval combat system designs and architectures. The two partners are also exploring next-generation combat management systems for the Indian Navy and Coast Guard.
Mumbai-based Pipavav Defence and Offshore Engineering Co (formerly Pipavav Shipyard Ltd) specialises in ship building and repairs and covers a wide range of vessels including naval & coast guard vessels, as well as vessels for oil & gas companies. It is the first Indian company to be granted a licence to build warships for the Indian Navy. Only last month, Pipavav signed an agreement with Mazagaon Docks to build surface warships for the Navy.
Backed by IL&FS PE and Jacob Ballas, Pipavav Defence has recently got the nod from its board to raise up to $200 million through securities. Earlier, VCCircle had reported that the firm was looking at an FCCB issue.
Also read: Pipavav to raise $200M via FCCB
(Edited by Sanghamitra Mandal)