India admits interest in buying Embraer commercial division
Revealed by a country’s top official to the Business Standard newspaper, the deal would involve ties to an Indian sovereign wealth fund
The Indian government has taken an interest in acquiring Embraer’s commercial division, the newspaper Business Standard revealed. Citing a senior government official, the publication said India would be “very interested” in the deal, originally closed by the Brazilian company with Boeing.
India’s interest in Embraer was revealed in May by Reuters, and shortly thereafter confirmed by the company itself, which also cited China as another possible partner. But at the time, the Indian government did not comment on the matter officially.
“We are very interested. We are exploring alternatives,” said the source, who acknowledged that the Brazilian government has already been communicated on the matter. The official also said that the purchase would be financed through India’s sovereign wealth fund, the National Investment and Infrastructure Fund.
The official admitted the risk of an agreement like this in a period of so many uncertainties, but argued that there is no such opportunity in the aviation market.
Another aspect that makes Embraer interesting is the drop in its market value, which intensified after the coronavirus pandemic. The Indians could pay a much lower price than that offered by Boeing, of $4.2 billion for 80% of the commercial aircraft division, even at a time when the Brazilian manufacturer enjoyed financial health.
Local aviation industry
India has been manufacturing aircraft for many years, but without any leading role. The most important company in the sector is HAL (Hindustan Aeronautics Limited), which was founded in 1940 and belongs to the Indian government.
The company has already produced several models under license, including Russian and European aircraft. HAL has also developed some of its own aircraft, such as the LCH attack helicopter, the Tejas fighter and the Saras, a regional turboprop that resembles the Embraer CBA-123 Vector. None of them, however, achieved great projection.
With the second largest population in the world, India has undergone an expansion in air transport in recent years and is listed as one of the largest markets in the world, which would be an attraction for Embraer. With a base in the country, the company could also explore the region more effectively than it does today.
The failed experience with Boeing, however, could make the deal more complex. Embraer ended up paying dearly for preparing to create the joint venture Boeing Brasil Commercial. In addition, there may be a possible reluctance by the Brazilian government to allow control of the manufacturer in the hands of another country. Formerly a state-owned company, Embraer still has veto shares in the hands of the government.
In a statement to Airway, Embraer said that “there are no plans to sell the commercial aviation unit or any other business area. The company is open to discussing growth partnerships aimed at specific projects or insertion in markets ”.