Per media reports, the aerospace unit of diversified technology company Honeywell International Inc. (HON) is holding strategic discussions with Indian conglomerate Mahindra Group about a potential partnership in the defense and civil-aviation sectors.

The talks represent Honeywell’s attempt to cash in on the huge opportunities presented by the Indian defense industry, especially in light of the recent plans of the government to increase foreign direct investment ("FDI") limits set for the defence sector.

The discussions are seemingly centered on the aerospace, defense and general business aviation sectors.

Honeywell already has presence in India with its recent alliance with Tata Power Ltd. The deal licensed Tata Power to produce Honeywell’s Patented Tactical Advanced Land Inertial Navigator (TALIN) in India. This military-navigation system allows vehicles and artillery to navigate very accurately even without GPS satellite guidance, setting the standard for locally-produced defence technologies in India.

The U.S. conglomerate’s potential venture with Mahindra Group will be in sync with the Indian Government’s objective of organically growing its defense industry. Recently, the new government approved a plan to raise the amount of FDI allowed in its defence industry from 26% to 49%, and Honeywell is laying the foundation to position itself as a leading player in the same.

Separately, the Indian Air Force is contemplating giving Honeywell a contract to supply around 270 F125IN engines as part of a project to upgrade its fleet of Jaguar planes. The project covers about 125 Jaguar fighter jets.

Honeywell holds a positive outlook for the Indian defense industry, seeing immense potential in terms of infusion of both technology and capital. The company is proficient in navigation, engine technology, unmanned aerial vehicles and helicopter safety, and can assist the Indian military in reducing operational costs and increasing mission success.

Honeywell currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look include Federal Signal Corp. (FSS), Lockheed Martin Corp. (LMT) and Northrop Grumman Corp. (NOC), each carrying a Zacks Rank #2 (Buy).

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