Shares of defence companies such as Hindustan Aeronautics Ltd (HAL), Mazagon Dock Shipbuilders, Bharat Dynamics, Mishra Dhatu Nigam, Garden Reach Shipbuilders & Engineers (GRSE), and Bharat Electronics (BEL) were flashing in green today after the Defence Acquisition Council (DAC) approved major procurements worth ₹1.45 lakh crore for the armed forces. The two recent back-to-back procurement orders - Cabinet Committee of Security’s (CCS) approval for 240 AL-31FP engines worth ₹26,000 crore for the Air Force and 10 capital acquisition proposals worth ₹1.45 lakh crore allay concerns regarding the lack of orders for defence sector, says ICICI Securities.
Among these defence stocks, Mazagon Dock Shipbuilders topped the chart with more than 5% gain, followed by GRSE, which surged over 3%. Meanwhile, HAL, Bharat Dynamics, BEL, and Mishra Dhatu Nigam shares were trading higher in the range of 0.5% to 2%. On the other hand, the equity benchmarks Sensex and Nifty were reeling under selling pressure, falling up to 0.6% in the first hour of trade so far.
Defence shares got a boost today, in an otherwise weak broader market, after DAC on Tuesday approved 10 capital acquisition proposals worth ₹1.45 lakh crore to enhance defence preparedness. The list includes Future Ready Combat Vehicles (FRCV) for Indian Army; Air Defence Fire Control Radars and Do-228 aircraft for Air Force; Nex-gen Fast Patrol and offshore patrol vessels for Indian Navy. Of the total acceptance of necessity (AoN), 99% will be procured locally under “Buy (Indian) and Buy (lndian-Indigenously Designed Developed and Manufactured) categories”.
The high level of indigenisation content implies attractive opportunities for players in domestic defence ecosystem, ICICI Securities says in a just released report. “We await further developments pertaining to progress on Pinaka and MRSAM orders, that are pending for some time now,” it adds.
For Indian Army, the DAC has given green signal for procurement of Future Ready Combat Vehicles (FRCVs) for modernisation of the tank fleet. “The FRCV will be a futuristic Main Battle Tank with superior mobility, all terrain ability, multilayered protections, precision & lethal fires over and real-time situational awareness,” Ministry of Defence said in a release on September 3.
The list also includes procurement of air defence fire control radars, which will detect & track aerial target and provide firing solution. “The proposal has also been approved for Forward Repair Team (Tracked) which has suitable cross country mobility for carrying out in-situ repair during mechanised operations. This equipment is designed & developed by Armoured Vehicles Nigam Limited, and is authorised for both mechanised Infantry Battalion and Armoured Regiment.”
Besides, three AoNs have been accorded to enhance the capabilities of the Indian Coast Guard (ICG). “The procurement of Dornier-228 aircraft, Next Generation Fast Patrol Vessels having high operational features in rough weather conditions and Next Generation Offshore Patrol Vessels with advanced technology and enhanced long-range operations, will enhance the capability of ICG to carry out surveillance, patrolling of maritime zone, search & rescue and disaster relief operations.”
On September 2, 2024, the CCS approved the procurement of 240 AL-31FP aero engines to power the Su-30MKI fighter jets. The engines will be procured under the ‘Buy (Indian)’ category at an estimated cost of ₹26,000 crore. The delivery of these aero-engines is likely to start after one year and will be completed over eight years. The engines will have an indigenous content of over 54% due to indigenisation of some key components of aero-engines.
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