DUBAI  - Tawazun, the United Arab Emirates' defence and security industry development arm, is taking a 50% stake in VR Technologies, a unit of Russian Helicopters, the two companies said on Monday.

The announcement was made at the biennial Dubai Air Show as the UAE seeks to invest in advanced defence industries as part of a diversification strategy. Both companies will be investing 400 million euros ($442.60 million), a statement from Russian Helicopters said. The agreement, which was signed by the director-general of Russian Helicopters, Andrey Boginsky, and the director-general of Tawazun, Tareq Abdul Raheem Al Hosani, gives Tawazun equal representation on the board of VR Technologies.

The joint venture may establish an assembly line in the UAE for the VRT-500 helicopter, a light helicopter which is currently under development, Boginsky told Reuters.

Tawazun is taking the stake in VR Technologies through the Tawazun Defence Security & Development Fund. The transaction will be finalised in first quarter 2020.

VR Technologies, a subsidiary of Russian Helicopters, was set up in 2014 and develops helicopters and unmanned aerial vehicles.

Russian Helicopters has also received strong interest from Indian companies for assembly of VRT-500s in India. "Preliminary discussions have been held," Boginsky said.

Testing of the VRT-500 is going on and the first flight is scheduled for first quarter 2020, he said, adding the company is targeting sales of 1,000 VRT-500s by 2035.

($1 = 0.9038 euros)

(Reporting by Stanley Carvalho; Editing by Alex Richardson and James Drummond) ((Nafisa.Eltahir@thomsonreuters.com; +971 56 226 1754;))