On Friday, there was a sharp jump in shares of defense sector companies. In BSE, shares of major companies of this sector climbed 9% in intraday. This fast in the market has come due to hopes of getting big orders in the coming days.
Garden Reach Shipbuilders and Engineers (GRSE), BEML, Majhgaon Dock Shipbuilders (MDL), Bharat Dynamics (BDL), Bharat Electronics (BEL), Cochin Shipyard, Hindustan Aeronautics (HAL), Apollo Micro Systems and Data Patters (India) The shares climbed between 4% to 9%. During this period the BSE Sensex rose 0.63% to 77,242.
BEL shares rose by 5%
Bharat Electronics Limited (BEL) shares rose 5% to ₹ 292.10. It saw this fast after the company had good results from the company’s December 2024 quarter (Q3Fy25). BEL’s consolidated profit rose by 52.5% to ₹ 1,311 crore, due to strong operational performance.
In Q3Fy25, BEL revenue increased by 38.6% to ₹ 5,771 crore on an annual basis. It recorded an increase of 25.3% on a quarterly basis. The company’s Ebitda margin also increased by 316 basis points to 28.9% annually, although it fell by 147 basis points on a quarterly basis.
The company said that during 9mfy25 it received orders worth about ₹ 11,000 crore. Despite this, BEL has retained the target of order of ₹ 25,000 crore for the whole year. This means that there is a possibility of getting big orders in the coming two months.
The management of Bharat Electronics Limited (BEL) has hoped to inflow a big order in the coming years. BEL is expected to get ₹ 15,000 crore in base order inflow every year, including AMC and Spare Contract. In FY26, the company expects an order of ₹ 25,000-30,000 crore for the QRSAM (Quick Reaction Surface-to-Nair Missile).
In addition, FY27 has an order of ₹ 15,000 crore under the MFSTAR radar system for the Medium Range Surface-to-Air Missile (MRSAM) system and Next Generation Coreweight (NGC). During the same period, several derivative orders of ₹ 8,000-10,000 crore are expected to be received under radar, electronic warfare, communication and missile systems for Navy and Aero platforms.
Nomura estimates: ₹ 85,000 crore order in FY25-FY27
According to brokerage firm Nomura, BEL is expected to get a total order of ₹ 85,000 crore from FY25 to FY27.
According to a report by ICICI Securities, BEL is expected to receive orders of more than ₹ 25,000 crore in FY26, which will include large projects such as QRSAM and Next Generation Coreweight. As of December 2024, the company’s order backlog is ₹ 71,100 crore, which is about three times its last 12 months earnings (TTM).
GRSE shares up 9%
Garden Reach Shipbuilders and Engineers (GRSE) shares rose 9% in Intrade on Friday and reached ₹ 1,649. Its stock has gained 13% in the last four days. Recently GRSE has signed (MOU) to form and supply advanced weapons and electronic systems with Apollo micro systems.
According to Elara Capital analysts, orders in the defense sector will increase rapidly in the quarter of January to March (Q4FY25). With the completion of defense expenses in FY25, domestic companies have been given 75% of the total budget. In particular, the Navy budget has increased by 18% compared to last year.
Minor fall in defense expenditure
According to the Ministry of Defense (MOD), the actual defense capex in FY25 was ₹ 1.7 lakh crore, while the estimated (FY25B) was ₹ 1.72 lakh crore. The total defense expenditure between April and October was 36%, which is 700 basis points less than the previous year.
According to the brokerage firm, large orders may be announced in the fourth quarter of FY25 (Q4FY25). These include imports of Rafale-M fighter jets (USD 4 billion) and MQ-9B drones (USD 3 billion). Apart from this, a domestic order of ₹ 36,000 crore is also expected for Next Generation Corewells.
Orders worth ₹ 60,000 crore were given in FY23 a single day
On 29 March 2023, on FY23, the Ministry of Defense had ordered ₹ 60,000 crore in a single day. From FY23 to December 2024, a total of ₹ 8.3 lakh crore orders were sanctioned under domestic accepting of Necessity (AON). AON worth ₹ 5.4 lakh crore was approved during FY13-22. Orders approved in the last 2.75 years are 53% more than the previous decade.
Indigenization in India’s defense policy remains a main theme. The FY25 has a 75% share of the total defense capex (₹ 1.05 lakh crore) for domestic expenses, which is the highest level ever. In FY24, this share was 74% and 50% in FY20.