The Rafale Mystery Deepens : Why did Dassault Invest in An Obscure Anil Ambani Company?

Interview with Ravi Nair - the person behind this story.

Exclusive: Post-Rafale, Dassault Investment in Inactive Anil Ambani Company Gave Reliance Rs 284 Crore Profit

Without any of the publicity which accompanied its smaller investment in a joint venture with Anil Ambani as part of the Rafale deal, the French firm has paid nearly 40 million euros for a 35% stake in an obscure Reliance company.

By Rohini Singh and Ravi Nair in The Wire

New Delhi: Even as Dassault Aviation and Anil Ambani’s Reliance group battle allegations that extra-commercial considerations drove their joint venture on Rafale, regulatory filings in France and India reveal that the French defence major followed its JV with an investment in 2017 of approximately 40 million euros in another Anil Ambani venture that is loss making and has almost zero revenues. The investment translated into a Rs 284 crore profit for the Ambani group company, Reliance Infrastructure, which sold shares in a subsidiary, Reliance Airport Developers Limited (RADL) at a premium.
It is unclear how the valuation for the RADL stake was reached between the two groups or why Dassault would buy a substantial share in an unlisted company that has little to no revenues and has nothing to do with Dassault’s core business.

Public filings by Reliance Infrastructure, a Reliance ADAG group company, show that it sold a 34.7% stake in RADL, a wholly owned subsidiary, to Dassault Aviation in FY 2017-18. The terms of the sale are not known but Reliance said it made a profit of Rs 284.19 crore on the sale of 24,83,923 shares which had a face value of Rs 10 each.

Reliance Airport Developers posted losses of Rs 10.35 lakh for the financial year ending March 2017 and earned revenues of Rs 6 lakh. In the year ending March 2016, the firm had no revenues and posted losses of Rs 9 lakh.

The company has stakes in a clutch of subsidiaries owned by the group. Most of them are loss making and are airport projects that were awarded by the Maharashtra government in 2009 for Rs 63 crore. A Business Standard report dated October 2015 quoted government officials and ministers saying that due to lack of progress in developing these projects by the company a decision was reached to take back the airports. The company also reportedly wanted to get rid of its stakes in these airports but a news report from January 2017 indicated it had changed its mind.

Ironically, while the Maharashtra Airport Development Council (MADC) was prepping to take back charge of the airports due to dissatisfaction with RADL’s progress on the projects, it speedily allotted 289 acres of its land to another group company the same year.

Dassault Aviation’s annual report for 2017 mentions the firm’s acquisition of ‘non listed securities’ including a 34.7% equity participation in Reliance Airport Developers. “In 2017, we also strengthened our presence in India through an acquisition of a 35% stake in Reliance Airport Developers Limited, which operates in the management and development of airport infrastructures,” its report said.

Oddly, the annual report of Reliance Airports posted on the Reliance Infrastructure site notes that Dassault Aviation now holds 34.79% of ordinary shares but when it comes to describing the terms and rights attached to the equity shares, the details have been blanked out.


Screenshot of RADL annual report.

The transaction finds an indirect mention in the Reliance Infrastructure annual report, buried in Note 43 under the exceptional items head, as “profit on sale of investment in Reliance Airport Developers Ltd” of Rs 284.19 crore.

In the Dassault report, the net book value of securities in RADL is stated as 39,962,000 euros. By contrast, the net book value of its securities in DRAL – the joint venture with Reliance for the Rafale – is just 962,000 euros, though presumably it will grow.


Reliance Infrastructure, Annual report for FY 2017

In a recent interview to the Economic Times, Dassault CEO Eric Trappier said Rs 70 crore had been invested in Dassault Reliance Aerospace Limited, Dassault’s JV with the the Anil Ambani group. Of this only 49% is Dassault’s stake.

Filings by Dassault Aviation in France show that besides the Rs 22 crore that Dassault pumped in as equity, it has also given a 4 million euro loan to the JV which roughly converts to Rs 32 crore in Indian rupees. This money, a source in the Anil Ambani group told The Wire off the record, was used by DRAL to pay for its hangar at Mihan. In his interview, Trappier did not mention the money spent for the purchase of a 35% stake in RADL.

How the land was acquired

Prime Minister Narendra Modi announced the Rafale deal on April 10, 2015. In July 2015, Reliance Aerostructure applied to the Maharashtra Airport Development Council for land in its Mihan SEZ in Nagpur. It was allotted 289 acres in August 2015 for Rs 63 crore.

The company later said it would take only 104 acres. While the allotment was done in August 2015, Reliance Aerostructure only paid the dues it owed on July 13, 2017, after missing several payment deadlines.

Reliance Aerostructure was incorporated on April 24, 2015, days after Modi announced the Rafale deal. It was also given a license to manufacture fighter aircraft by the defence ministry in 2016, which opposition parties allege is in violation of government guidelines.

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Filings for financial year 2017 show that Reliance Aerostructure received an inter-corporate deposit of Rs 89.45 crore from Reliance Infrastructure, the same year that Dassault aviation bought 34.79% of Reliance Infrastructure’s stake in Reliance Airport Developers.

From the sequence, it would appear that Reliance Aerostructure used the money received from Reliance Infrastructure to settle its outstanding Rs 38 crore payment with MADC for the land allotted. The dues had been outstanding for more than a year. Filings by Reliance Aerostructure state that the company’s “net worth has been eroded” but was kept as a going concern because of adequate financial support from its promoters. In FY 2017, Reliance Aerostructure posted a loss of Rs 13 crore. The year before that, it posted a loss of Rs 27 crore.

In a recent interview to CNBC, Dassault CEO Eric Trappier had claimed his company chose Reliance ADAG as its offsets partner because it had land available next to an airport. However, the land was only given to Reliance by the state government after it had reached an understanding with Dassault to collaborate on the Rafale.

According to a Dassault press release, Reliance Aerostructure’s joint venture with Dassault Aviation – Dassault Reliance Aerospace Limited (DRAL) – was formally incorporated in 2017 but goes all the way back to April 2015.

The land contribution agreement filed by DRAL with the Registrar of Companies dated July 12, 2018 talks of a sub-lease agreement between Reliance Aerostructure, DRAL and Dassault Aviation. According to this agreement, DRAL, the joint venture partner, would pay Rs 22.8 crore to Reliance as premium for 31 acres of leased property to the joint venture. This debt was converted into “non cash consideration” for 22.8 lakh equity shares of the company. Therefore, the land allotted by the Maharashtra government was used to pay for Reliance’s equity stake in the joint venture company. Dassault aviation gave Rs 21.09 crore cash for its equity stake in the firm.

The Wire has contacted Dassault and Reliance ADAG seeking greater clarity about the land transaction and Dassault’s wider dealings with the Reliance ADAG group, including the valuation of its investment in Reliance Airport Developers Ltd. The story will be be updated with their responses when received.

Note: In an initial version of this article, the euro figure corresponding to RADL’s stated profit of Rs 284 crore was mistakenly stated as 4 million at the prevailing exchange rates in 2017. It is actually 40 million.

Britain And India: A Convenient Scapegoat In A Time Of Economic Crisis

By Colin Todhunter



07 November, 2012

Countercurrents.org



India is likely to be told this week that Britain plans to slash its 280 million pounds a year aid to it following growing domestic pressure on Prime Minister David Cameron to stop funding emerging economic powers such as India at a time when Britain is in serious economic crisis.



International Development Secretary Justine Greening during her visit to New Delhi is expected to discuss a timetable for winding down British aid commitment to India. She is expected to make it clear that the UK’s commitment to India will change radically at the end of the current eight-year 1.6 billion pound programme which lasts until 2015.



The idea to cut aid has been building for some years and has received added impetus from recent events. In 2011, Cameron led one of the largest-ever business delegations to India, comprising six cabinet ministers and around 60 business leaders. He lobbied heavily in favour of supplying India with the British built Eurofighter. But in 2012 as Britain seemed destined to lose the contract for 126 fighter jets, the knives came out in Britain – both for Cameron and for India too.



Instead of the British media attacking the sordid nature of the heavily taxpayer-subsidised arms industry and the way its massive profits are made by stoking tensions and war, it saw better mileage from cashing in on fear mongering by telling the public that the apparent loss of the contract to the French company Dassault, which makes the Rafale fighter, could jeopardise thousands of British jobs. It would have been much more constructive for the media to have regarded the loss any jobs in the arms sector as an opportunity to reinvest arms industry subsidies in more socially useful ventures, such as renewable energy.



As a backlash over India’s decision, however, sections of the public and various self-appointed opinion leaders took it on themselves to also apportion blame to India by linking the loss of the contract to the issue of aid. They were quick to point out that the British Government’s aid package is around 15 times larger than what France sent to India in 2009.



They asked, “Where is the trade dividend?” – especially in light of former International Development Secretary Andrew Mitchell saying that the aid relationship with India is very important and its focus included seeking to sell Typhoon jets. He made it clear that aid was linked to trade. In order to get the government off the hook, this stance (and claims that aid was being used as a bribe) was soon being strenuously denied by various members of the government in light of the French seemingly bagging the prize.



Public pressure has subsequently grown over sending aid to India, especially at a time when massive public sector job losses and slashes to services are being made in Britain. The issue has certainly struck a chord with sections of the British public.



Egged on by politicians and the media, sections of the public began to ask why should the overburdened British taxpayer give aid to a country with 300 billion dollars worth of foreign reserves and year on year growth that has been over 8.5 per cent? It did also not go unnoticed that India has funds not just for its own aid and space programmes, but for nuclear weapons too, while Britain itself has no space programme and has been debating scaling down its own nuclear weapons systems.



Many in Britain also questioned why aid should be given to India, which has an economy on course to overtake Britain’s in the next ten years, and that, according to financial advisers Merrill Lynch, has 153,000 dollar-millionaires – a number that grew by 20 per cent in just one year, compared with Britain’s own increase of less than one per cent.



The argument proceeded along the lines that India might do better to scrap its space programme, aircraft carriers, nuclear weapons and its huge aircraft buying programme worth billions and redirect all those funds to invest in improving the plight of the poor.



And then there was the matter of giving money to India being a waste anyhow, seeing that rich Indians and politicians have salted away billions in Swiss bank accounts since independence. The accusation is that much aid money to India is thus chewed up by corruption and fraud. The lavish spending of India’s rich has been targeted too, with much focus on multi-storey Mumbai penthouses, Formula 1 and the like.



Cut through the tabloid-type hysteria and the media’s agenda, and there is indeed a certain logic behind many such criticisms. But what has often been ignored during this tirade against India is that, as a strategy for poverty alleviation and within the broader context, the impact of aid is minimal at the very best.



There is no denying that, despite India’s rising power on the world stage, poverty remains rife and the country is home to a third of the world’s malnourished children. India’s annual average income per person is around 2.5 per cent of Britain’s.



However, much of the hardships are today fuelled by rising inequality brought about by neoliberal economic policies. Inequality in India has increased significantly since it opened up its economy in the early 1990s (1). India’s rich elites have benefited enormously, and this has often been at the expense of the poor. Look no further than the real estate speculators and the land grabs from the poor, the rising obesity levels and the persistent malnourishment, the corporate rich and the theft of natural resources in the tribal areas and the high GDP and the low poverty alleviation statistics. Aid is like using a plaster to stem a burst dam.



Regardless of whether India even wants this relatively small sum of aid in the first place from it’s former colonial oppressor, which so many Indian politicians have openly stated it patently does not, it’s a pity that sections of the British media and certain politicians do not highlight the fact that the sum given by Britain to India is anyhow only less than one per cent of Britain’s debts – hardly a drain on the British economy as it is too often made out to be. It’s also a pity that they don’t focus more on the real drain placed on the British economy via the hundreds of billions that are being picked from the pockets of ordinary Brits via bank bail outs, corporate subsidies and fraud and tax avoidance and evasion by the rich.



According to economics professor John Foster (2), the aggregate wealth of Britain’s richest 1,000 people was in 2010 some 333 billion pounds. In 2010, Britain’s aggregate national debt was half that amount. In 2009, the top 1,000 increased their wealth by a third, meaning that the amount they actually increased their wealth by in just one year was half of the national debt!



But that is a taboo issue. It’s not up for public debate or scrutiny. It’s not to be questioned. The dirty machinations of capitalism are to be hidden away – preferably in an offshore bank account.



Much easier to point the finger at India in order to divert attention from the predatory capitalism that continues to fuel Britain’s economic woes and exacerbate poverty in India. Much easier to use aid to India as a convenient whipping boy.



But can we expect much better? Not really. The British press, politicians and establishment mouthpieces have been using welfare provision within Britain itself as a convenient scapegoat for capitalism’s failings for decades!