Assessing the surge: What’s driving the exuberance in defence stocks?
Hindustan Aeronautics Ltd, Bharat Electronics Ltd, Mazagon Dock Shipbuilders, Cochin Shipyard and Data Patterns up between 11% and 36%. What’s fascinating is, the Nifty India Defence index has shot up 14% in the past month, outpacing the Nifty 50, which has seen a mere 2% rise. Presently, much of the enthusiasm in this sector is due to recent preliminary business updates from the defence equipment manufacturers.
HAL registered its highest ever revenue of over ₹29,810 crore for FY24, which implies 11% year-on-year growth. BEL reported around 14% growth in its turnover in FY24 at around ₹19,700 crore, while Mazagon Dock Shipbuilders recorded a turnover of about ₹9,400 crore, up 20%. Meanwhile, Cochin Shipyard has inked a Master Shipyard Repair Agreement with the US Navy.
In February, GIC Pvt Ltd acquired a 6.32% stake in Data Patterns, valued at ₹650 crore, through a series of block deals. These developments further indicate the underlying traction. Besides, with the government fulfilling its commitments, investor confidence in the Indian defence sector is rising.
The Indian government plans to spend $130 billion during FY24-30, an increase of around 7% compounded annually (GDP growth estimated to grow at a CAGR of about 6.5% during FY24-30) for fleet modernisation across all armed services, according to a Nirmal Bang Institutional Equities report on 5 April. India’s defence exports have hit an all-time high of ₹21,083 crore in FY24, up 32.5% year-on-year. Moreover, countries like UAE, Armenia, Guyana, and Vietnam, among others, are entering into various export contracts with Indian companies.
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