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India’s Interest in Embraer Was Revealed by an Official to the Business Standard Newspaper, the Deal Would Involve Ties with an Indian Sovereign Fund
The Indian government is interested in acquiring Embraer’s commercial division, the Business Standard newspaper revealed. Citing a senior government official, the publication stated that India would be “very interested” in the deal, originally closed by the Brazilian company with Boeing.
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India’s interest in Embraer was revealed in May by Reuters, and shortly thereafter confirmed by the company itself, which also mentioned China as another possible partner. However, at the time, the Indian government did not officially comment on the matter.
“We are very interested. We are exploring alternatives,” said the Governor of India, who acknowledged that the Brazilian government has already communicated on the subject.
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The official also stated that the purchase will be financed through India’s sovereign fund, the National Investment and Infrastructure Fund. The official admitted the risk of such a deal in a time of so much uncertainty but argued that this opportunity does not currently exist in the aviation market.
Embraer Experienced a Drop in Its Market Value
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 US$ 4.2 billion for 80% of the commercial aircraft division, even at a time when the Brazilian manufacturer enjoyed financial health.
India’s Aviation Industry
India has been manufacturing aircraft for many years, but without any leadership role. The most important company in the sector is HAL (Hindustan Aeronautics Limited), founded in 1940 and owned by the Indian government.
The company has 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, have gained significant prominence.
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 globally, which would be attractive for Embraer. Based in the country, the company could also explore the region more effectively than it currently does. However, the unsuccessful experience with Boeing may complicate the deal. Embraer ended up paying dearly for the preparation of the Boeing Brasil Commercial joint venture.
Additionally, there may be potential reluctance on the part of the Brazilian government to allow control of the manufacturer to be in the hands of another country. Once a state-owned company, Embraer still has veto shares in the hands of the government.
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