Antoine Caput

Biz@India

September 2015

Positioning Itself as Expert Solution Provider

ANTOINE CAPUT, Vice President & Country Director, Thales India

With its expertise as solution provider in defence telecommunication, security and transport, Thales in India is entering India’s key urban development programmes such as installation of new metros and smart cities.

How has the market been in the last couple of years?

Thales in India is growing and we are offering marketing solutions from our entire global business units. We are active in defence and transportation for urban development as well as for airways. We also offer solutions for civil aircraft, space as well as security, particularly in term of cryptology and cybernetics to secure urban India. India offers immense potential for Thales that began its activity in defence telecommunication in partnership with BEL in 1953. With over 60 years of experience, we now act as local player with three joint ventures, i.e., with Larsen & Toubro for software development, particularly air traffic management as well as in flight entertainment; with Bharat electronics limited in Bangalore and the third with Samtel based in Greater Noida in military avionics. We are also upgrading Mirage 2000 with Dassault, supplying new solution and new equipments for the new aircrafts. Two aircrafts that we will deliver by the end of this year will will be assembled by HAL under the supervision of Thales and Dassault team.

In terms of market breakup for you how much is the percentage for defence and urban transport?

We can say presently three quarter of defence and the rest transport.

Government has aggressive plans of introducing metro railways across cities, what size do you see in that?

This is a very interesting trend that Thales has already mobilised. I would particularly like to underline the decision made this year to allocate exclusive budget in railways to Train Protection & Warning System (TPWF) to implement modern signaling system on urban lines specifically. TPWF is the acumen of the Thales Communications and Security (TCS), designed according to both International and European standard, making Thales one of the world leaders in that technology. We have already done pilot in India and now thanks to the budget allocated to railways, new project is coming that we have been waiting for years. We are going to localise production of the equipment in India through transfer of production and then we will be able to serve in India through an Indian base and first standard should come during summer.

Thales, last year, won a contract to modernise TPWS (Train Protection and Warning System) of the Indian Railways network

What potential do you see in the market for both signaling and communication upgrade of the railways as well in the installation of new metros?

The budget for the project allocated this year is around 120 millions. I assume that they make effort in providing funds to the railways to improve the facility of the passenger to improve the quality of the railway system as a continuous process and split the investments among years. I believe India may be the biggest railway network after Russia and is in the process of becoming the biggest for metro. Thales, as the leader of this technology and having participated in the pilot, is committed to bid for the project and hopefully win a substantial portion of the market although it is very clear and understandable that the Indian railways will not give the complete market to the one supplier. We are keen to have competitors and we believe that satisfaction of our clients is the key.

Who is your competition for the railways?

Bombardier and Alstom are a few of the competitors. However, what is important to say is that signaling is the security of the system and it’s a very serious subject on which we have merely 4 to 5 suppliers in the world. The entrance ticket on this industry is extremely high because you have to validate that your system is one hundred percent safe for the network and for the traffic.

Despite being guarded, do you see the potential of new competition emerging like China which is undertaking huge railways modernisation, expansion and manufacturing?

Probably it will come, but today its not there in signaling, telecommunication and ticketing system in metro. However, India is in the process of developing a new approach of signaling solution that is conceptually interesting. For emerging countries, there needs to be a balance between investment and the labour, service and security you need to get. Depending on each configuration, the new Indian approach is interesting and we are looking at it.

Have you seen a change in the business climate in India in the last one year?

In the last six months, I would say undoubtedly it has been changing and India is accelerating. In June for our Global business Unit (GBU) meeting for land and air system with its executive committee, Thales as well as Thales in India decided to come to India for a week to meet clients, partners, suppliers and the media. In a discussion with the head of the GBU on whether we should be optimistic towards India, we rephrased the question to whether India is moving or not? And the conclusion is undoubtedly moving and for us it is moving in the right direction with a pragmatic approach of the subject. It is trying to find a balance between the administrative process and the efficiency for speeding up the decision to provide to the needs of Indian armed forces and civilians on time. However, there is still a lot to do. For instance, for the new Defence Procurement Procedure (DPP) that is under preparation we have given our views, particularly on the offset subjects and we expect that it becomes a part of the new book when it comes.

What are your key suggestions and demand in DPP?

When Prime Minister Narendra Modi was in France, we gave a specific note on this and on the Make in India policy. Today the offset commitment is made by that the company that has signed the contract and in a group like Thales, it may be complex for offset to be linked directly to each subsidiary. We would prefer a group approach, where the group makes an offset commitment and respects it. If India wants to pass a message to the business community in the world, it could say I will welcome and recognise any purchase made accordingly to the offset commitments by a group, this is what we call one group approach which is also our motto. It will be beneficial to India. If we limit to the company that has namely signed the contract, the scope of the company may be limited to what the company is marketing and stop other companies to go to India and buy. Today Thales has offset commitments that is recognised by the Indian authority as efficient because we have setup a dedicated system within the Thales group that we have labeled ‘go to India’ to help all Thales units in looking for the suppliers, partners, subcontracts and to buy in India. In Thales India that I am heading, we have a dedicated procurement team of over 20 people that are actively supporting all ours units in the world with our network. This is also to illustrate why we believe that India is accelerating. Apart from the industrial network that comprise of big groups, we also recognise the network of small and medium enterprises that are doing extremely well. We have selected numerous such enterprises, trained them and provided them with documentations to produce the prototypes that we provide them. It is impressive to see the growth in terms of quality, quantity and technology developed in a few years.

Coming back to the defence, recently the government took the decision to buy 36 Rafaels. Is it better than the original deal?

As Dassault is the commercial leader, it speaks for all as far as the Rafael business is concerned. And we prevent ourself to make a declaration regarding the Rafale.

What potential do you see in the 100 smart cities project in India for Thales and do you see local expertise developing the capacity and capabilities that you offer over time?

Very often the right solution is the cooperation between Indian companies and foreign companies. As far as Thales is concerned, within the smart cities we have several topics such as safety, urban transport and we have dedicated solutions, for instance how to ease the traffic flow within the city. We believe that subjects such as telecommunication and utility require local expertise, so our strategy is to concentrate on solutions specific to Thales that the country lacks currently. For instance, in Mexico that may be the first worldwide reference for safe city, we collaborated with local giant to supply dedicated solution such as the video management system and the control and communication system. In India as well we plan to bring the elements of our expertise. Of the 100 smart cities, we are focusing on a few and working with French authorities as France pays immense attention on sustainable development programmes and smart and safe cities.

Thales is working with French authorities for the development of selective smart cities in India

There are several initiatives between France and India and France recently decided to provide additional EUR 1 bn through French Development Agency for the urban development projects. Cities are under selection by France including Pondicherry and Chandigarh that we will also be focussing at, but we want to position ourself as an expert solution provider. We are also working with several local partners for collaboration.

Would you be happy to transfer these capacity and capabilities to the Indian partners as well?

Yes, the cooperation is something in the DNA of Thales that we have practiced in the countries around the world and we do understand that is the key for success in the Indian market as well.

What is the value of Indian market today and 10 years down?

It is difficult to give you the precise figure, as you know in our business we have something called ‘elephant’ for big projects that come from time to time.

We already have one in our bag, MLU for Mirage 2000 and we had Submarine Scorpene in the past. So the market is growing and so is our local footprint and presence, we are about 300 hundred people working in India now.

Do you see the market doubling in few years for you?

At least the potential is there. We are not making the policies of India and the order of priority, but we are attentively listening what the government is saying. We are reminded regularly that the budget is not elastic and there are limitations and priorities, but we will substantially improve.