We're all set for a new experience. To visit the old Ventura website, click here.
Ventura Wealth Clients

Defence PSU stock: Bharat Electronics’ shares rise 2% on securing Rs 1,155 crore orders

Stocks
2 min Read Sep 18, 2024
Share

In a significant development for share market investment, Bharat Electronics Ltd (BEL), a Navratna defence public sector undertaking (PSU), witnessed a 2% rise in its share price following an announcement of major order acquisitions. The defence PSU revealed that it had secured orders totalling Rs 1,155 crore, boosting investor confidence and drawing attention from market watchers.

The highlight of these orders is an Rs 850 crore contract from Cochin Shipyard Ltd for the supply of Indigenous Multi-Function Radar in X Band. This fully indigenous radar, designed by DRDO and manufactured by BEL, is capable of detecting, acquiring, and tracking airborne targets. The radar system will enhance the capabilities of naval ships, offering a strategic advantage in the ever-evolving defence landscape.

In addition to the Cochin Shipyard contract, BEL reported securing Rs 305 crore in orders for various defence systems and equipment. These include maritime complexes for ships, thermal imagers, communication systems, fire control solutions, and spares and services. With these orders, BEL's total order inflow for the current financial year has reached an impressive Rs 7,075 crore, positioning the company as a key player in India's defence modernisation efforts.

A positive outlook for defence stocks

The boost in BEL's share price is not just tied to its recent order wins but also the broader positive sentiment surrounding India's defence sector. The Defence Acquisition Council (DAC) recently approved capital acquisition proposals worth Rs 1.45 lakh crore, which include the procurement of air defence fire control radars. This development is seen as particularly favourable for BEL, as the company is well-positioned to benefit from such projects.

According to market analysts, including Nomura India, BEL stands to gain from the procurement of Air Defence Fire Control Radars (ADFCR/Atulya), as well as follow-up orders related to shipbuilding projects, including the Lynx-U2 Fire Control Systems and associated sensors.

The overall growth potential for India's defence sector is also drawing attention. A recent report from Ashika Stock Broking predicts that India's defence production will expand at a compound annual growth rate of 21% between FY23 and FY29. The Rs 6.2 lakh crore defence budget allocates Rs 1.7 lakh crore for capital acquisitions, with a significant portion set aside for domestic procurement, further enhancing the self-reliance of the nation's defence industry.

Key takeaways

  • BEL secured orders worth Rs 1,155 crore, including a major Rs 850 crore order for an indigenous radar system for naval ships.

  • The recent orders have propelled BEL's share price by 2%, reflecting positive sentiment in the share market investment space.

  • India's defence budget allocates Rs 1.7 lakh crore for capital acquisitions, boosting growth prospects for companies like BEL.

  • Analysts predict a 21% CAGR for India's defence production over FY23-FY29, underscoring the sector's long-term growth potential.

  • BEL is expected to benefit from follow-up defence projects, particularly in air defence fire control and shipbuilding systems.