Shares of defence companies such as Hindustan Aeronautics, BEL, Paras Defence, BEML, Astra Microwave, among others gained up to 4% on Tuesday after the Defence Acquisition Council (DAC) approved capital acquisition proposals worth around Rs 2,12,000 crore on October 26.
HAL and BEL rose 2% each on the BSE, while Paras Defence, BEML, and Astra Microwave gained up to 4%.
The approvals, which grant Acceptance of Necessity (AoN) to the proposals, are aimed at advancing modernisation across the armed forces. Around 82% of the approved procurements will be sourced from Indian industry, according to the Ministry of Defence.
The clearances cover a broad range of military equipment for the Indian Army, Indian Navy and Indian Air Force, including helicopters, air-defence systems, drones, artillery systems and naval platforms.
For the Indian Army, the DAC approved proposals covering High Mobility Vehicles (HMVs), Self-Propelled Tracked Gun Systems, Gun Shot Response Systems (GSRS), Light Multi Role Helicopters (LMRH), Very Short-Range Air Defence Systems (VSHORADS) and Platform Based Counter Unmanned Aerial Systems (C-UAS). The approvals also include long-range unmanned aerial systems, surveillance UAVs, an Integrated Surveillance and Strike System and Long Range Kamikaze Drone Systems.
The Indian Air Force also received clearances for helicopters, air-defence systems, weapons and mobile X-Band Doppler Weather Radar Systems. Special Utility Helicopters will cater to the IAF's air-transport requirements, while the weather radar systems will provide high-resolution, localised weather surveillance in forward areas.
A major component of the approvals is a Rs 20,000 crore proposal to procure 200 Light Multi Role Helicopters for the Army and Air Force, according to ANI, citing defence officials. The helicopters will be manufactured in India, with Indian companies taking the lead. The contract is expected to be divided between the lowest bidder (L1) and the second-lowest bidder (L2), defence officials told ANI.
Tata-Airbus and Adani Group-Leonardo could compete for the order, while US-based Bell Helicopters is also expected to offer its helicopter, ANI reported. The long-pending programme aims to replace the armed forces' ageing Cheetah and Chetak helicopter fleets, with around 400 helicopters scheduled for retirement in the coming years.
For the Indian Navy, the DAC cleared the procurement of Active Offboard Decoy Systems (AODS) and other major naval platforms. AODS is expected to strengthen the Navy's anti-missile defence, particularly against modern anti-ship missiles. The other naval platforms will be designed and built indigenously to enhance the Navy's combat capabilities through modern warfare systems.
The approvals span mobility, surveillance, air defence, precision strike and counter-drone warfare, with the bulk of the proposed procurement expected to come from domestic industry.
Defence stocks outlook
India's defence sector has emerged as one of the most attractive long-term structural growth ideas within the manufacturing universe, and remains structurally well-positioned to benefit from long-term military modernisation needs, rising localisation, strong domestic order pipeline, growing exports and sustained policy support, Bajaj Broking said in its latest research report.
This sustained increase in capex, along with procurement preference for domestic manufacturers under the Atmanirbhar Bharat initiative, has created a robust multi-year opportunity across aircraft, helicopters, missiles, naval platforms, artillery systems, air-defence systems, defence electronics, radar systems and unmanned platforms, according to Bajaj Broking Prive’s report.
It added that the Defence Acquisition Procedure (DAP), positive indigenisation lists, defence industrial corridors, and liberalised FDI norms have further boosted the domestic manufacturing ecosystem.
Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.