Thales’ Engagement with India

Thales’ Engagement with India: Products, Services, Joint Ventures, Offset Obligations, and Future Outlook

Thales, a French multinational, has been a key player in India’s aerospace, defense, and digital security sectors since 1953. Its products and services in India include advanced radar systems, electronic warfare solutions, avionics, in-flight entertainment, and cybersecurity technologies, notably for the Rafale jets and civil aviation. Thales operates through joint ventures (JVs) with Reliance Defence, Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), and L&T Technology Services, alongside standalone units like engineering competence centers in Noida and Bengaluru. Offset obligations, particularly from the Rafale deal, drive local manufacturing and sourcing. Over the past 25 years, Thales has invested over €1.5 billion, with plans for an additional €1 billion by 2026. Engagement has bolstered India’s defense and technological capabilities but faces challenges like slow processes and cultural differences. The next five years promise deepened collaboration, focusing on drones, cybersecurity, and “Make in India” initiatives.

Products and Services of Thales in India

Thales provides a wide array of products and services tailored to India’s defense, aerospace, and digital security needs. In defense, Thales supplies critical equipment for the Rafale fighter jets, including the RBE2 AESA radar, Spectra electronic warfare system, optronics, communication navigation and identification systems, cockpit displays, and power generation systems. “Thales provides a number of modern equipment and systems aboard the Rafale,” said Patrice Caine, Chairman and CEO of Thales, emphasizing their role in enhancing India’s air combat capabilities.

For civil aviation, Thales equips Air India’s Airbus and Boeing fleets with avionics and in-flight entertainment (IFE) systems, and provides navigational aids to the Airports Authority of India. “Thales is present in India’s civilian aerospace sector with retrofit of avionics and IFE to Air India,” a company spokesperson noted. Low-cost carriers like IndiGo and Jet Airways also use Thales’ avionics.

In the emerging drone sector, Thales offers solutions for unmanned traffic management, counter-drone systems, and payload-carrying drones. “Our solutions allow civil and military aviation authorities to detect and verify a drone’s registration number, identify its pilot, and confirm its flight authorization in seconds,” said Ashish Saraf, Thales India VP and Country Director. Thales’ counter-drone technologies include detection, classification, and neutralization systems like jamming or laser-guided missiles.

In cybersecurity and digital identity, Thales supports India’s digital transformation with data protection, encryption, biometrics, and IoT solutions. “Thales has a strong presence in India serving the needs of the country from payment to enterprise security and IoT,” a Thales release stated. Its digital identity solutions cater to banking, government, and enterprise sectors, enabling secure digital services.

Joint Ventures and Standalone Units in India

Thales operates in India through several joint ventures and standalone units, aligning with the “Make in India” policy. Key JVs include:

• Thales Reliance Defence Systems Ltd: Established to fulfill offset obligations from the Rafale deal, this JV focuses on manufacturing microwave technologies and airborne electronics in Nagpur. “The JV will develop skills and activity in the special economic zone of Mihan-Nagpur,” Thales and Reliance stated jointly.
• Thales and Bharat Electronics Ltd (BEL): This partnership focuses on radar and electronic warfare systems, leveraging BEL’s manufacturing capabilities.
• Thales and Hindustan Aeronautics Ltd (HAL): Collaboration on avionics and systems integration for military aircraft.
• L&T Technology Services JV: Formed in 2014, L&T Technology Services acquired 74% of Thales Software India Pvt. Ltd., with Thales retaining a 26% stake. “This JV is a reflection of our commitment to India,” said Eric Lenseigne, Managing Director of Thales in India.

Standalone units include two Engineering Competence Centres (ECCs):

• Noida ECC: Focuses on digital identity, cybersecurity, and IoT, employing over 1,500 engineers. “The ECC in Noida is focused on digital identity and security business,” Thales reported.
• Bengaluru ECC: Concentrates on defense, aerospace, and transportation, supporting R&D and innovation.

Thales also collaborates with public and private firms like Samtel and Reliance Aerostructure for component sourcing. “The company has formed tie-ups with public and private sector firms including Samtel, BEL, L&T Technology Services, and Reliance Aerostructure,” noted a report. Additionally, Thales acquired Gemalto and Guavus, enhancing its digital and analytics capabilities in India.

Offset Obligations

Thales’ offset obligations stem primarily from the €7.8 billion Rafale deal, which includes a 50% offset clause mandating reinvestment in India. Thales, responsible for 25% of Rafale’s equipment by value, has an offset liability of approximately €800 million from an earlier Mirage 2000 upgrade contract and additional obligations from the Rafale deal. “Thales, which supplies 25% of the Rafale equipment by value, also has a nearly $800 million offset obligation,” according to industry executives.

To meet these obligations, Thales has invested in local manufacturing, sourcing €500 million worth of components from Indian suppliers like BEL and L&T. “Thales sources €500 million worth of components locally,” reported The Hindu BusinessLine. The Reliance JV in Nagpur is a key vehicle for offset fulfillment, producing components for global Rafale orders. Thales also plans to expand local supply chains, with 75 suppliers currently engaged in hardware and software.

Engagement Over the Last 25 Years

Thales’ engagement with India has grown significantly since 2000, driven by India’s defense modernization and digital transformation. Initially focused on supplying equipment, Thales expanded its footprint through JVs, acquisitions, and local R&D. In 2000, the company rebranded from Thomson-CSF to Thales, signaling a global strategic shift that included deeper Indian engagement.

Over the past 25 years, Thales invested over €1.5 billion, including €1 billion in digital technologies like AI, cybersecurity, and big data from 2015–2018. “Thales, over the past three years, has invested over 1 billion Euros in developing its expertise,” a company release stated. The acquisition of Gemalto and Guavus bolstered its digital capabilities, while JVs with Reliance and L&T expanded manufacturing.

Thales’ workforce grew from a few hundred to 2,200 by 2021, with plans to reach 3,000 by 2021–2023. “Thales expects the total strength of its India operations to double to 3,000 people in next 2-3 years,” said Patrice Caine. The establishment of ECCs in Noida and Bengaluru marked a shift toward innovation-driven partnerships. “We are increasing our engineering footprint, digital competencies,” said Marko Erman, Thales CTO.

Thales also deepened academic collaborations with IITs (Delhi, Bombay, Madras) and IISc Bangalore for R&D in open hardware and AI. “Thales is partnering with IIT Madras, IIT Delhi, IIT Bombay, and IISc Bangalore,” the company noted. Participation in events like DefExpo and Aero India enhanced its visibility and stakeholder engagement.

Outlook for the Next Five Years

Thales plans to invest €1 billion ($1.2 billion) in India by 2026, focusing on drones, cybersecurity, and aerospace. “Thales Group is betting big on India and has decided to invest a billion euros,” reported The Times of India. The drone sector is a priority, with India’s drone count expected to rise sixfold in 5–8 years. “India currently has 6 lakh drones, a number that will rise at least six times,” said Ashish Saraf.

Thales aims to expand its supply chain, doubling its footprint from 75 to 150 suppliers. “In the last five years, we have invested Euro 0.5 billion in India. We plan to double the same,” Saraf added. The company will enhance its ECCs, focusing on AI and cybersecurity, and continue supporting “Make in India” through local production. “India’s ‘Make in India’ policy is fully supported by Thales,” the company stated.

The defense segment will see growth due to India’s rising military spending. “The Defence segment will be further supported by strong demand in 2025,” Thales projected. However, challenges like the geostationary satellite market’s weakness may temper space business growth.

Benefits for India

Thales’ engagement has significantly benefited India by:

• Technology Transfer: Advanced systems like AESA radar and Spectra enhance India’s defense capabilities. “We are convinced that we can bring to India things that are unique in terms of technology,” said Caine.
• Job Creation: Over 2,200 jobs, with plans for 3,000, boost employment. “Thales hired over 300 employees in 2020 and plans to hire 300 more in 2021,” reported The Hindu BusinessLine.
• Local Manufacturing: Sourcing €500 million locally strengthens India’s industrial base. “Thales sources €500 million worth of components locally,” noted a report.
• Innovation: ECCs and academic partnerships foster R&D. “India is an interesting melting pot of ideas,” said Erman.

Difficulties

Challenges include:

• Slow Processes: India’s bureaucratic delays hinder project timelines. “The processes can be slow to our standards,” Erman noted.
• Cultural Differences: Differing perceptions of time and business practices create friction. “The perception of time in India is different from Europe,” said Erman.
• Complex Offset Compliance: Meeting offset obligations requires navigating India’s regulatory landscape, which can be intricate.
• Market Competition: Thales faces competition from domestic and global players, requiring continuous innovation.

Financial Value of Investments

Thales’ investments in India include €1 billion in digital technologies (2015–2018), €0.5 billion in the last five years, and a planned €1 billion by 2026, totaling over €2.5 billion. “We have invested Euro 0.5 billion in India. We plan to double the same,” said Saraf. Local sourcing of €500 million and offset obligations of €800 million further amplify economic impact. These investments have created thousands of jobs and supported 75 supply chain partners, enhancing India’s defense and tech ecosystem.

Reflection

Thales’ engagement with India exemplifies a strategic partnership that aligns with India’s ambitions for technological self-reliance and defense modernization. The company’s contributions, from Rafale systems to cybersecurity solutions, have bolstered India’s capabilities, while its €1.5 billion investment and planned €1 billion infusion underscore its commitment. “India is among the top three priority countries for Thales,” said Patrice Caine, reflecting the strategic importance of this market. The JVs with Reliance, BEL, and L&T, alongside ECCs, have driven local innovation and manufacturing, aligning with “Make in India.” “We are moving towards an innovation-driven approach with India,” said Marko Erman, highlighting the shift toward collaborative R&D.

However, challenges like bureaucratic delays and cultural differences, as noted by Erman’s comment on differing time perceptions, require Thales to adapt its approach. These hurdles, while significant, are outweighed by benefits like job creation, technology transfer, and economic contributions. The sourcing of €500 million in components and the creation of over 2,200 jobs demonstrate tangible economic impact. “Thales sources €500 million worth of components locally,” a report confirmed, underscoring its role in India’s industrial growth.

Looking ahead, Thales’ focus on drones and cybersecurity aligns with India’s digital and security priorities. The projected sixfold increase in drone usage and Thales’ solutions for unmanned traffic management position it as a leader in this space. “Our solutions allow authorities to detect and verify drones in seconds,” said Ashish Saraf, signaling future growth potential. However, Thales must navigate India’s competitive market and regulatory complexities to sustain its momentum.

For India, Thales’ presence has catalyzed technological advancement and economic growth, though maximizing benefits requires streamlining processes and fostering mutual understanding. The next five years offer opportunities for deeper collaboration, but success hinges on addressing challenges proactively. As Caine noted, “We are starting 2025 with confidence and determination,” setting a positive tone for Thales’ continued partnership with India.

References

• Thales sees India operations headcount at 3,000 in 2-3 years - The Economic Times
• Thales to invest a billion Euro in India over next 5 years - Times of India
• Thales Group - Wikipedia
• Thales reports its 2024 full-year results | Thales Group
• Mission Make in India: Thales sources €500 million worth of components locally - The Hindu BusinessLine
• Thales: French company Thales to put $1.2 billion in India over 5 years - Times of India
• L&T Technology Services forms a Joint Venture with Thales to strengthen Avionics Business | Thales Group
• Thales in India | Thales Group
• Joint venture: Thales, Reliance Defence seal deal for joint venture for radars, electronic warfare - The Economic Times
• Thales sees India operations headcount at 3,000 in 2-3 years, CIO News, ET CIO
• India a 'melting pot' of ideas, Thales discovering new opportunities: CEO - Business Standard