Mazagon Dock, Garden Reach, Paras Defence And Others Gain As Government Clears Mega Acquisitions

Most defence companies' stocks rose in early trade on Wednesday after the government approved 10 capital acquisition proposals amounting to Rs 1,44,716 crore spread across the Army and Coast Guard.

Shares of Paras Defence and and Space Technologies Ltd. jumped over 2%, followed by over 1% gain in Mazagon Dock Shipbuilders Ltd., Cochin Shipyards Ltd. and Garden Reach Shipbuilders & Engineers Ltd.

The Defence Acquisition Council, chaired by Defence Minister Rajnath Singh, on Tuesday accorded the acceptance of necessity, or AoN, for proposals that include modernisation of the tank fleet of the Indian Army, procurement of air defence fire control radars, procurement of Dornier-228 aircraft, next generation patrol vessels with advanced technology.

The materials will be acquired domestically under the Buy (Indian) and Buy (Indian-Indigenously Designed, Developed, and Manufactured) categories.

The amendments in the Defence Acquisition Procedure, 2020, were also cleared by the government to promote procurement of advanced technologies from startups and micro, small and medium enterprises under the Innovations for Defence Excellence and Technology Development Fund schemes.

The total share of domestic procurement has seen a phenomenal improvement from 54% in fiscal 2019 to 75% five years later and is expected to improve further, Antique Stock Broking Ltd said in a note. The new proposal is a tremendous opportunity for local defence manufacturers like HAL, BEL, Mazagon Dock, GRSE and other defence players, it said.

Companies like Bharat Forge Ltd, Mahindra Defence Ltd, Tata Advanced Systems Ltd. are likely to benefit from the planned procurement of future-ready combat vehicles, while Bharat Electronics Ltd. stands to gain from air defence fire control radars.

Defence stocks recently witnessed a dip after a phenomenal run-up in the last two years. Reports of the government's acquisition plan led to a jump on Tuesday.