Adani Group eyes large defence contracts through Air Works acquisition

Defense Contracts

The Adani Group is eyeing large defence and aircraft contracts in the Indian and international markets through the acquisition of India's oldest private maintenance, repair and operations (MRO) organisation Air Works.

Billionaire Gautam Adani-led Adani Group's wholly owned subsidiary Adani Defence & Aerospace, on December 23, signed definitive agreements to acquire 85.8 percent stake in Air Works for an enterprise value of Rs 400 crore.

"The deal will allow the Adani Group to expand its not only its offerings in the aviation sector but will also give the conglomerate the expertise needed to bid for many defence contracts as well, for aircraft, helicopters and in the drones ecosystem," a senior official involved in the acquisition process told Moneycontrol.

He added that acquisition will also help the group meet the maintenance needs of both commercial operators and the armed forces.

Another executive involved with the deal told Moneycontrol that the Adani Group has been keen on taking up defence maintenance and manufacturing contracts and the acquisition will help the company expand its presence in these markets. "Defence would be one big thing, where there is a lot of focus from the government to open it up. It is typically a long-cycle business and requires a lot more capital. Secondly, we are seeing the components business picking up traction," the second executive told Moneycontrol, adding that in the aircraft maintenance business ancillary jobs also make up a large volume of contracts for around 40 different aircraft engines.

The MRO sector provides critical engineering support to keep aircraft airworthy and is important for aerospace and defence industries.

Air Works, a key player in the aviation services sector, operates across 35 cities in India and employs more than 1,300 personnel. The company provides a broad range of services, including line maintenance, heavy checks, and avionics work for fixed-wing and rotary aircraft. It also handles base maintenance for narrow-body and turboprop aircraft at its facilities in Hosur, Mumbai and Kochi, with certifications from over 20 international civil aviation authorities.

The Adani Group had first announced the acquisition of Air Works in 2022, but the process was delayed after the Punj Lloyd Group, which had held 23 percent stake in Air Works was forced into liquidation as lenders failed to find a solution within the bankruptcy process.

Adani Group's foray into defence manufacturing

In the past, the Adani Group has collaborated with Swedish arms major Saab to manufacture 114 NE (Next Generation) Gripen-Es fighter jets in India for the Indian Air Force (IAF). The deal announced in 2017 was for procuring 100 more single-engine combat jets for the IAF. However, in 2023 Saab terminated its nearly six-year long association with Adani Defence.

In 2018, the Adani Group had applied for a licence to manufacture helicopters under Adani Defence Systems & Technologies.

Since then, the Adani Group has partnered with the EDGE Group, a top United Arab Emirates advanced technology and defence group, for joint development and production across a wide range of critical defence technologies, including missiles and weapons for air, land, and infantry use, ammunition, air defence systems, advanced platforms like unmanned aerial systems (drones), loitering munitions, counter-drone systems, and unmanned ground vehicles.

Earlier this year, the Adani Group also tied up with the Thales Group to manufacture 70mm rockets locally. The 70mm rockets produced under this partnership will be used by the HAL Rudra and Prachand helicopters, critical assets in India's military operations.

According to media reports, the Adani Group is also evaluating a foray into defence and aerospace production by exploring tie-ups for manufacturing a range of defence equipment, pitching the group’s mainstay asset — the country’s largest private port and SEZ at Mundra in Gujarat — with its sea and land linkages as a possible manufacturing location.

MRO facility at Adani airports?

The acquisition of Air Works also provides the Adani Group with the technical expertise to set up an in-house MRO facility at one of the eight airports it currently operates.

In June 2024, announcing the schedule for opening of a new terminal at Guwahati Airport in April 2025, Chief Airport Officer Utpal Baruah had said plans for subsequent expansion phases included an MRO facility, aerocity and helipad.

While the Adani Group has not publicly shown interest or announced plans to set up an MRO facility at the eight airports it currently owns, industry experts told Moneycontrol that setting up an MRO facility will not only help boost the topline of the Adani Group but will also play a major role in the growth of its airports into the biggest in India.

"An MRO facility at the Chaudhary Charan Singh International Airport, Guwahati Airport or the Navi Mumbai International Airport will immediately attract more international and domestic flights to the airport and boost its growth," Lokesh Sharma, a senior defence and aviation expert, said.

He added that through the acquisition of Air Works the Adani Group will gain first-hand experience of running an MRO operation before expanding or setting up a new facility.

The potential

The Yogi Adityanath government is also keen on expanding the aircraft MRO operations in Uttar Pradesh. The state has allocated a budget of about Rs 28,000 crore in FY25 for the civil aviation infrastructure for airstrips modernisation, land acquisition, and more.

Revenues of domestic MRO services providers are expected to triple to Rs 5,500-6,000 crore by FY28 from around Rs 1,800 crore currently, a report by ratings firm Crisil stated.

MRO services will be in high demand as it correlates with the size of the aircraft fleet. From around 684 aircraft by end of FY23, Indian carriers are likely to have 1,400 aircraft by end of FY30, as per estimates made by CAPA India, an aviation consultant.

Consequently, the overall amount spent by Indian airlines on MRO services (both domestic and global) is projected to surpass Rs 25,000 crore by 2028 from around Rs 14,000 crore levels last fiscal, Crisil added.