Mahindra & Mahindra Ltd., India’s leading utility vehicle maker, has signed an agreement with the world’s No. 2 defence contractor, Britain’s BAE Systems Plc., to set up a joint venture defence company in India, the companies said on Monday.

The initial investment will be $21.25 million, with an equity split of 74 percent for Mahindra and 26 percent for BAE according to India’s foreign investment regulations.

Foreign companies have been competing hard for a piece of the $30 billion India is expected to spend on military procurement over the next five years.

The joint venture company will be based in New Delhi, with a factory in nearby Faridabad and a start-up staff of 100.

The companies said they have already developed a prototype of a mine-protected vehicle specifically for the Indian market.

They said they also plan to produce artillery, including howitzers, and will continue work on armoured and bullet-proof versions of Mahindra & Mahindra vehicles, including the Scorpio, Bolero, Rakshak, Marksman light armoured vehicle and Rapid Intervention Vehicles.

“We look forward to making a major contribution to both the security and economy of India,” Mahindra Group managing director Anand Mahindra said in a statement.

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