HAL and Other Defence Stocks Cheer Over Defence Acquisition Council's Approval of Rs 70,500 cr Proposals

On 16th March 2023, the Defence Acquisition Council (DAC) approved proposals worth Rs 70,500 crore for the Armed Forces & Indian Coast Guard which shall be indigenously designed, developed and manufactured. This includes Rs 56,000 crore of BrahMos missiles, Shakti EW systems and Utility Helicopters-Maritime for Indian Navy.

Alongside, Long Range Stand-Off Weapon for the Indian Air Force gets a nod, which is to be integrated on SU-30 MKI aircraft. Also, 155mm/52 Caliber Advanced Towed Artillery Gun System (ATAGS), along with High Mobility & Gun Towing Vehicles shall be procured for the Indian Army. 

Morgan Stanley says the ATAGS are developed by the Defence Research and Development Organisation, wherein the actual order could come through in four to five months and is likely to be split between Bharat Forge & Tata Advanced Systems. Morgan Stanley has an overweight rating on Bharat Forge with Rs 1,068 as target price.

Hindustan Aeronautics is a big beneficiary of this announcement by DAC, as it shall supply Advance Light Helicopters MK-III to the Indian Coast Guard. The Helicopter will be able to carry a suite of surveillance sensors which will enhance the surveillance capabilities, along with giving full night capability and Instrument Flight Rules capability for operations of the Indian Coast Guard. Hindustan Aeronautic's order book is at Rs 85,000 crore, while additional Rs 15,000 crore is for repairs and overhaul orders. The management expects to clock 8 percent revenue growth in FY23 and FY24, while FY25 onwards it could grow in double digits.

The Ministry of Defence further adds that the Medium Speed Marine Diesel Engine under Make-I category is a significant step as, for the first time India is venturing into the development & manufacturing of such engines indigenously to achieve self-reliance.

To keep pace with the emerging technologies and counter the adversaries in the Western and Northern front, the necessity of the new weapons and its integration with the delivery platforms was felt by the Indian Government. To achieve the same objectives, the DAC accorded the approval to Indian Air Force’s proposal for Long Range Stand-Off Weapon which will be indigenously designed, developed and integrated on SU-30 MKI aircraft.

Along with Hindustan Aeronautics, the entire defence pack gain in trade today. Among these, Bharat Forge, Bharat Dynamics, Mazagon Dock Shipbuilders, Bharat Electronics, Hindustan Aeronautics, Garden Reach Shipbuilders and Engineers open today's trade at least 2 percent higher. Other scrips such as Data Patterns, Astra Microwave Products, MTAR Tech, Larsen & Toubro, Cochin Shipyard, Mishra Dhatu also gain interest.