Top 5 defence stocks to watch out in Nifty's run-up to 40,000
top defence stocks from the index or that can be a part of the index in the future. Defence stocks in India are growing in importance, driven by government emphasis on modernisation, increased spending, and the "Make in India" initiative. Defence exports have surged to around ₹160 bn in FY23, a tenfold increase since 2016-17.
However, today's largest blue-chip companies are not pre-destined to hoover up all the benefits. A new set of emerging blue-chip contenders could potentially join the Nifty 50 and contribute to its journey toward 40,000. #1 Larsen & Toubro (L&T) At the top of our list is the country’s engineering major, Larsen & Toubro.
L&T is committed to leading the defence revolution in India by playing a significant role in the sector. It offers a wide range of products, including ships, submarines, land combat vehicles, radar systems and PSLV rockets. Presently, L&T’s defence segment is a small part of the whole, bringing in around 2-3% of the total group revenues in the projects and manufacturing segment.
However, the company stands out as a significant player in the Indian private defence industry. What sets it apart is the company's extensive expertise in ship and submarine construction, given that the Indian defence segment plans to procure numerous modern ships and submarines for the Navy. This segment is expected to grow on a strong footing amongst other expanding businesses of the company.
Between 2019-2023, the company’s sales and net profit have grown at a 5-year compounded annual growth rate (CAGR) of 9% and 8%, respectively. The returns have been strong, with the Return on Equity (RoE) and Return on Capital Employed (RoCE) averaging over 12% and 13.3%. L&T has deleveraged its balance sheet in the
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