Step in the right direction
Joseph J. Battaglia, President & CEO, Telephonics
SP’s M.A.I. (SP’s) : What do you think about the 49 per cent FDI limit increased from 26 per cent recently? Joseph J. Battaglia: I believe that increasing the FDI limit from 26 per cent to 49 per cent is certainly a step in the right direction. This new limit will encourage US industry to much more seriously consider making investments in India. More often than not, the US industry partner is providing intellectual property that they have spent many years and a great deal of internal research and development money to develop and to essentially “give that away” for a 26 per cent share in a joint venture does not always prove to be a prudent decision. SP’s: What all can your company offer to Indian with this change now versus the past limit? Battaglia: Telephonics will be more willing to share some of the latest state-of-the-art technology at the 49 per cent level than they might otherwise want to do at the 26 per cent level. For India that would mean leap-frogging to a higher, more sophisticated technology base more quickly. For the Indian military, this would mean greater warfighting capabilities and a greater level of readiness with which to confront adversaries. SP’s: As on date can you brief us about your joint activities with Indian industry? And the business arrangements involved in these joint activities? Battaglia: Telephonics is partnered with the Mahindra Defence Systems (MDS), a division of Mahindra and Mahindra, in a classical 26 per cent/74 per cent ownership of the Mahindra Telephonics Integrated Systems (MTIS) joint venture (JV). The purpose of this JV is to transfer Telephonics’ advanced radar and intercommunication systems technology to MTIS, ultimately establishing MTIS as the first indigenous radar house in India specialising in weather radar, maritime surveillance radar, and intercommunication management systems. Eventually, it is expected that MTIS will acquire the capability to design, modify, integrate, and repair radar and intercommunication systems in India for the Indian market. SP’s: Why there seems to be a demand for 51 per cent FDI limit still? Is that justified? Battaglia: Raising the FDI Limit to 51 per cent or even higher would be the “icing on the cake” because US companies who have spent a great deal of financial, human, and capital resources developing their intellectual property would truly (and justifiably) want to control the fate of their technology. In fact, in some cases, depending on the specific technology, they may be forced by US Government regulations, to closely monitor what happens to the technology they transfer to a foreign entity or they would not be permitted to transfer it. With a 51 per cent+ share of a JV, the US company would have more control over that.