"We will invest up to 49% in the joint venture company and the rest will be owned by the Indian partner," said one of the persons."We will also transfer critical technology to the joint venture in both defence and aerospace. The entire plan is part of the Make In India initiative."
The fund will be a subset fund of the National Infrastructure Investment Fund (NIIF) launched to invest in new infrastructure companies and stressed ones which are starved of capital.
Finance minister Arun Jaitley had proposed the setting up of NIIF in the last Budget with an initial capital of Rs 20,000 crore to help infrastructure companies meet their capital needs.
The government could raise 3 times the equity from the markets, or from other financial institutions, and invest heavily to help infrastructure companies build roads, power plants and improve railway infrastructure.
The basic concept of the project was mooted by Russian President Vladimir Putin during his visit to India in December. "The road map and the investment thesis will be finalised shortly," the second person said. Rusnano, owned by the Russian government, which manages $115 billion globally.
The defence and aerospace investment decisions are coming at a time when India, a long-term user of Russian defence products, has begun to look beyond the former communist nation. India last year had signed a deal to buy 36 Rafael fighter jets from France's Dassualt Aviation.
The joint fund will keenly look at modernisation contracts as India plans to spend about $100 billion on modernising its defence resources in the next decade.
"Most of the defence technologies are from Russia and it makes sense for a joint fund that will invest in either modernisation or procurement of new equipment," said an analyst tracking the sector.