Ahead of Finance Minister Nirmala Sitharaman’s budget announcement on Tuesday, July 23, industry experts expect a significant thrust on the defence sector, aligning with the government’s ‘Aatmanirbhar Bharat’ initiative. Defence majors like Hindustan Aeronautics Limited (HAL) and Bharat Dynamics Limited (BDL) are likely to be in the spotlight, as the government is expected to reduce reliance on imports and focus on indigenous production, paving the way for a promising growth curve.
“We expect the govt will maintain the momentum for Indian defence companies by promoting the Make in India initiative as it wants India to be self-reliant on defence and depend less on imports,” said Avinash Gorakshkar, head of research, Profitmart Securities.
Saurabh Jain, vice president–of research at SMC Global Securities shared a similar view. He said the Ministry of Defence seeks to focus on exports. “It is aiming to achieve a target of ₹50,000 crore by FY29 compared to ₹21,100 crore in FY24. This opens up significant growth opportunities for domestic defence companies,” said Jain.
Economic Survey 2024: Defence exports rise
According to the Economic Survey 2024, which was released today, July 22, India’s defence production grew from ₹74,054 crore in FY17 to ₹108,684 crore in FY23. The export authorisations increased from 1,414 in FY23 to 1,507 in FY24.
The survey also claimed that around 100 domestic companies export a wide range of equipment, including aircraft Dornier-228, Brahmos Missiles, radars, simulators, and armoured vehicles.
Union Budget 2024: Stocks to watch out
While Hindustan Aeronautics Limited (HAL), and Bharat Dynamics Limited(BDL) are projected to do very well, analysts eye a significant increase in the allocation for the defence sector from the previous ₹6.21 lakh crore, which was announced during the interim budget in February 2024.
“Both HAL and BDL should do very well as they have large order books for the next 2-3 years going ahead,” said Gorakshkar. Expected orders for aircraft Tejas, Su-30MKI, and Dhruv helicopters, along with collaborations with major players like Safran and Airbus, suggest a continued growth for HAL, said Saurabh Jain.
Jain, however, also cautioned about HAL’s current valuations. Hence, “keeping an eye on its execution capabilities and potential market adjustments is advisable,” said the analyst from SMC Global Securities.
Gorkakshkar also said that while there might be a “small uptick on the budget day,” profit bookings are expected later on.
