Embraer has agreed to buy 51% of Novavayu Aerospace, a newly incorporated Mahindra subsidiary, as the two manufacturers prepare for possible C-390 Millennium assembly in India. Their proposed ₹60 billion industrial project (about US$621 million) depends on India selecting the aircraft and placing an order.

Mahindra's October 9 regulatory filing sets the stake purchase price at approximately ₹510,000 (about US$5,280), with completion expected on or before December 1, 2026. Novavayu had generated no revenue or income by the disclosure date. The agreement has been signed; the filing does not confirm that the acquisition has closed.

The financial questions extend beyond the acquisition: how much capital Embraer would contribute to the Indian operation, and how much revenue it would earn from a successful bid. The announced share purchase price and procurement estimate leave both unresolved.

What the Nagpur proposal covers

Embraer and Mahindra identified Nagpur, in the western Indian state of Maharashtra, as the location for a potential final assembly line on October 1. Mahindra said the state government had allotted land and helped with related requirements. Embraer's announcement made the facility conditional on C-390 selection and an order under India's Medium Transport Aircraft programme.

Maharashtra's chief minister's office listed "Embraer (Mahindra)" among the proposed investments announced that day, with ₹6,000 crore, equivalent to ₹60 billion (about US$621 million), and 1,000 projected jobs in Nagpur. A crore equals ten million in India's numbering system. The Financial Express reproduced the government's figures in its coverage of the Invest Maharashtra event.

The amount gives investors a measure of the intended industrial commitment. The announcement does not explain how the partners would divide the funding or when they would spend it. It also provides no breakdown of financing sources or evidence of how much has already been invested.

Novavayu's initial capital was much smaller. Mahindra's incorporation disclosure records ₹1 million (about US$10,350) in subscribed capital and ₹10 million (about US$103,500) in authorised capital when the company was established on July 29. Its stated business includes aircraft and aerospace manufacturing and related services.

Those figures help explain the modest price for the stake in a company that had yet to generate revenue. They say little about the cost of building and running a factory. Embraer's proposed 51% ownership does not specify its share of future industrial spending; that allocation requires the financing and shareholder agreements.

The Reported 60-Aircraft Tender

India’s Defence Acquisition Council approved the need for medium transport aircraft on March 27, stating that they would replace the country’s An-32 and Il-76 transport fleets. The decision authorised the procurement requirement but did not select a manufacturer or award a contract.

On August 13, The New Indian Express reported that the government had invited bids for 60 aircraft under a programme estimated to be worth nearly ₹1 trillion (approximately US$10.4 billion). According to the newspaper, 12 aircraft would be delivered fully assembled, while the remaining 48 would be manufactured in India in partnership with a local company.

The requirement for local manufacturing and maintenance sets this programme apart from other international aircraft deals involving Embraer. A partnership with an Indian company could strengthen the Brazilian manufacturer’s position by expanding its industrial presence and access to the Indian market.

Embraer’s C-390 Millennium is competing against Lockheed Martin’s C-130J Super Hercules, which has also been proposed for the programme in partnership with Tata Advanced Systems. The American manufacturer’s proposal includes local manufacturing and maintenance facilities in India.

The potential deal could represent another step in Embraer’s efforts to expand its presence in the Indian market. Brazilian Finance previously examined the competition between the C-390 and the C-130J in its coverage of India’s reported US$12 billion transport aircraft programme.

Read also: Embraer C-390 Challenges Lockheed Martin for India’s $12 Billion Transport Aircraft Deal

How an award would affect Embraer's finances

An Indian order would add to a growing defence backlog. Embraer reported $6.1 billion in Defence & Security orders at the end of the second quarter, up 42% from a year earlier, within a consolidated firm-order backlog of $34.5 billion.

The company attributed the defence increase to its United Arab Emirates agreement, comprising 10 firm C-390 orders and 10 options. The options remain separate from firm orders.

Defence & Security revenue reached $304 million in the second quarter, up 38% annually, according to Embraer's financial report. Its adjusted operating margin, measured before interest and taxes, rose to 11.9% from 9.2%. An Indian contract would have its own production costs and implementation expenses, so the division's current margin cannot establish the project's return.

Embraer generated $401 million in adjusted free cash flow excluding Eve during the quarter. For the first half, the same measure remained negative at $46.1 million. Net debt excluding Eve stood at $214.5 million on June 30, and the quarterly results included an extraordinary $68 million tax credit. The figures are company-defined adjusted measures drawn from unaudited interim financial information.

In Nagpur, the production schedule and customer advances could change the amount of cash needed before revenue develops. Financing and any incentives would affect the partners' own contributions. The investment announcement leaves these terms unspecified.

The reported ₹1 trillion procurement estimate (roughly US$10.4 billion) also cannot be treated as Embraer revenue. The eventual contract would establish each participant's supply scope and payments to third-party suppliers. Revenue earned by Novavayu would need to be distinguished from earnings attributable to its shareholders. Multiplying the programme estimate by Embraer's 51% stake would not produce a reliable revenue forecast.

Ownership rules and the service business

Permission to own a defence manufacturer and eligibility to lead a procurement bid are separate regulatory questions.

A July Indian government briefing described foreign direct investment of up to 74% through the automatic approval route for new defence industrial licences, and up to 100% through government approval where modern technology is introduced. These general limits do not establish Novavayu's licensing status.

India's official presentation of the Defence Acquisition Procedure 2020 reserves certain procurement categories for vendors owned and controlled by resident Indian citizens, with foreign investment capped at 49%. The restrictions apply to specified categories. Assessing the Embraer-Mahindra arrangement requires the tender's classification and the role assigned to each company.

The ownership percentage also leaves questions about who controls budgets and borrowing, what rights each partner has over intellectual property, and how contracts between them would work. Contract currencies and hedging arrangements would determine the project's net exchange-rate exposure. An Indian factory location does not establish the currency in which customers would pay.

Maintenance could provide revenue beyond aircraft manufacturing. Embraer and Mahindra's February proposal included heavy maintenance, structural inspections, component repairs, avionics support and training. Embraer is also evaluating India as a regional maintenance hub for other C-390 operators. The plans depend on aircraft selection, and the announcements do not establish contracted regional service revenue.

The next dated corporate milestone is the expected completion of the stake purchase by December 1. For investors assessing the project's return, an aircraft award and the subsequent supply and financing terms would determine how much Embraer must invest, when it receives payment and how much of the contract's earnings reaches its shareholders.

Disclaimer: Dollar equivalents use the October 9, 2026 reference rate of ₹96.6149 per US$1 published by the National Stock Exchange of India. Conversions are rounded.