The agreement will see the companies jointly develop the radar, which is a fire control system for gun and missile systems.
Thales Surface Radars Activities senior vice-president Serge Adrian said: "We are pleased to work in close collaboration with BTSL for the development of this new type of fire control sensor to address the needs of the Indian and global markets.
"This strategic step goes beyond the co-development partnership; it reaffirms our commitment to the country and to actively contribute to the ‘Make in India’ policy.
The collaboration is expected to strengthen co-operation between Thales and BTSL in developing innovative technologies.
Under the terms of the agreement, Thales will bear the responsibility of overall system design for the new radar.
Meanwhile, BTSL will contribute to the joint effort from its facility in Bengaluru, India.
Designed to provide defence against small, highly manoeuvrable air and surface targets, Pharos is capable of controlling the engagement of targets under all weather conditions.
The system can control medium-calibre guns, ranging from 30mm to 76mm, for naval and ground-based applications.
Pharos also features electronic beam-steering capabilities that enable multiple-target tracking and integrated guided ammunition control.