India accounts for a minor share of business and staff of the €13- billion French electronic systems firm Thales, which has 61,000 employees across 56 countries. But that may change, as it looks to relocate its supply chain to India. Between 2012 and 2014, Thales’ order intake has grown 20 per cent in the Western markets, while in emerging markets, it has shot up 40 per cent. Thales’ India growth story includes companies of all sizes, particularly small and medium enterprises (SMEs), its Chairman and CEO Patrice Caine told BusinessLine during a recent visit to the country. Edited excerpts:

India is top on your list of key strategic countries. How well does this fit with the ‘Make in India’ campaign?

It fits perfectly well, because we have understood that the world has changed. When countries buy something from large global companies, they want jobs, local value additions, technology and manufacturing assets. This is normal. Growing in India means growing our workforce and research and development (R&D) here. It could be by the Thales team or with partners. Defence has certain rules and we are aware of that.

What are your R&D plans?

In terms of investment, Thales has a simple rule – we invest 20 per cent of our turnover in R&D at a global level. My goal for India is to take it to the same level.

What is India’s contribution to your R&D?

Keeping the Rafale contract aside, we have many other opportunities to build up our engineering team in India. It is difficult to give a summary, as Thales is involved with many defence equipment [manufacturers].

Can you cite examples?

We incorporated a joint venture with Bharat Electronics Ltd last year, which we are looking to strengthen. We are looking to co-develop products in the radar field that will be used for domestic and export purposes. India offers a low-cost base, which offers benefits on both sides of the coin. Another existing JV is with Samtel. We are looking to start production of displays for Mirage 2000, among others. These activities will be eligible to meet the 30 per cent defence offset sourcing norms. If these meet the offset obligations, fine, but this is not why we are co-developing these products.

India now permits FDI in defence up to 49% and 100% on a case-to-case basis.

There have been no examples as yet. Rather, the question for the Indian government is, would they accept control by a foreign investor?

But India permits 100% FDI on a case-to-case basis…Would you like to be that example?

Could be! But, this is not a race…The priority for us is to consolidate existing joint ventures in two years and not waste time on finding new partners.

Coming back to 100 per cent (FDI) – we operate on many models, including 100 per cent investment in the US, where we can control 100 per cent of a company involved in extremely sensitive operations. They have some rules regarding confidentiality. The companies are not permitted to share any information with non-US citizens. We have proxy companies in the US that provide vast majority of hand-held radios to the US special forces. We had to go through a transparent process.

In the transport sector, what software applications do you have?

The operational rules are never the same, and the standards are never the same for solutions across the world. Though there are European signalling standards, these need to be adapted to Indian conditions. DMRC (Delhi Metro) is not London Underground, nor is Indian Railways the Deutsche Bahn. So, these adaptations are better when you are close to the customer.

Are you making any attempt to win over the low-cost market share in India for in-flight entertainment (IFE)? At the moment, the Thales IFE is on the Air India fleet…

We made a strategic move last year by acquiring Live TV. This was a subsidiary of JetBlue, a low-cost American company. It was their IFE and connectivity supplier. We acquired it mostly for its connectivity asset, but in fact there is also an offer in terms of IFE extremely competitive and well adapted for this kind of market.

What about the Indian market?

We are considering coming back in that market (but) it also depends on whether the ongoing reform discussions will (allow) local companies to open more international routes, because these companies will go for IFE solutions if they have international routes. So, we are looking at this cautiously.

India is looking to set up 50 low-cost airports. Are you planning to enter?

It could be the case. It is too soon to say exactly if we will go extremely fast on this topic.

Thales is also the maker of Flight Management Systems. Given what happened with Germanwings (the pilot deliberately crashed the aircraft with over 150 passengers), are you looking at anything to override a pilot?

What we are developing with airframe manufacturers is, for the moment, centred on how never to lose track of an aeroplane, a question that rose after the Malaysia crash. All the technologies exist to follow or monitor an aircraft continuously.

Why not implement it as soon as possible?

First you have to talk to various stakeholders, like safety regulators, among others. Then there is the question of retrofit. In theory, the industry has everything in hand, particularly Thales, to implement these kind of solutions. But, frankly speaking, it will take time before it is implemented on each and every aircraft.

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