Are defence stocks on the moon as well?

Chandrayaan-3

The stock market is joining India’s celebration of the success of Chandrayaan-3.

Several companies that provided components for the Indian Space Research Organisation’s (ISRO) lunar mission saw their shares surge, with the likes of Tata Elxsi, Centum Electronics and MTAR Technologies witnessing a rise of 3-10 percent on August 24. Socks of Mishra Dhatu Nigam, Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), Larsen & Toubro (L&T) hit record highs, while MTAR Technologies touched its 52-week high.

Anirudh Garg, partner and head of research at portfolio management firm Invasset PMS, highlighted that the success of Chandrayaan-3 has opened up exciting opportunities for Indian aerospace and defence companies. “ISRO, India's space agency, has big plans ahead,” Garg said.

The agency is working on missions like Aditya-L1 for observing the sun, Gaganyaan 1 and 2 for testing spacecraft, Gaganyaan 3 for sending people into space, and Mangalyaan 2 for another Mars mission. These initiatives offer a host of new opportunities, he elaborated.

Vinit Bolinjkar, head of research at Ventura Securities, agreed with this sentiment. “Chandrayaan-3 marked just the beginning as numerous similar missions are anticipated to emerge in the near future,” he said.

Bolinjkar is of the view that Chandrayaan-3 has introduced fresh prospects for these companies within India and on a global scale within the space industry.

Due to the government's emphasis on self-reliance and increasing exports, defence stocks had already witnessed an impressive surge in their share price performance.

Besides, past rallies were also the result of defence companies being available at deep discounts and a strong growth outlook with huge order books.

In the February’s budget, around Rs 5.9 lakh crore or 13 percent was assigned to the Ministry of Defence. This has translated into significant orders for Indian defence companies.

The fervent buying spree, however, has sparked concerns of euphoria in the defence space. While some believe that even as stock valuations of defence players are relatively elevated, they mostly align with anticipated growth prospects, others worry that these stocks could be overvalued. Interestingly, market expert Sunil Singhania tweeted that Chandrayaan-3's production cost was Rs 615 crore, while companies supplying parts to the lunar project experienced a collective increase in market capitalisation of Rs 50,000 crore on August 23.

Even as the debate on defence stocks being in the overbought territory intensifies, here is a lowdown on companies that are believed to have played a crucial role in the successful landing of Chandrayaan-3:

L&T

The Indian multinational conglomerate produced essential booster segments, performed system integration and conducted proof pressure testing for Chandrayaan-3 at its Powai facility. Additionally, the company has been involved in integrating launch vehicle systems for India's space programme. L&T designs and builds critical aerospace components, tracking and launch systems for space missions as well as for the armed forces.

Tata Elxsi

The company developed spacecraft, avionics and software for Chandrayaan-3. Tata Elxsi has partnered with ISRO and is expected to continue strengthening its space offering.

MTAR Technologies

The company has been manufacturing rocket engines and core pumps for ISRO for some time. It made key parts of the rocket engines and core pumps of cryogenic engines required for the liftoff. Talking to CNBC-TV18, the company management said it plans to clock Rs 70 crore in revenue by FY24 in its defence segment. The company is one of the leading precision engineering solutions companies that caters to clients including ISRO and the Defence Research and Development Organisation, and has a strong presence in the clean-energy segment as well as the nuclear, space and defence sectors.

Paras Defence

The navigation system used in Chandrayaan-3 was supplied by Paras Defence and Space Technologies, one of the very few Indian companies with specialised technology competencies like optics and electromagnetic pulse (EMP) protection. The company provides products and services to five key product verticals—Defence & Space Optics; Defence electronics; EMP solutions; Heavy engineering; and through subsidiaries Drones and Antidrone systems.

BEL

The Bengaluru-based company helped manufacture Chandrayaan-3’s payloads. BEL is already a major player in the terrestrial segment of satellite communications, besides being a manufacturer of electronic products for Indian defence services and other Indian government organisations. Its product portfolio includes defence communication products, land-based radars, naval systems, electronic warfare systems, avionics, tank and armoured fighting vehicle electronic systems, electro-optics, weapon systems, shelters, simulators, batteries and components or devices, among others.

HAL

The company worked on the development of the lander and key mechanical support equipment. The company, in collaboration with L&T, supplied several components to National Aerospace Laboratories (NAL), which in turn provided key support for the Chandrayaan-3 mission. The aerospace division of HAL manufactures hardware for India's growing space programme.

Centum Electronics

The company is a large component supplier which makes 300-500 electronics parts for each mission. It is also engaged in the design, development and manufacture of electronics systems for space applications. Centrum’s product portfolio has evolved over the years to address applications in launch vehicles, satellite payloads, satellite bus systems as well as ground equipment.

Bharat Heavy Electricals Ltd

The company supplied its 100th battery pack to ISRO for Chandrayaan-3. The company is involved in space electronics and systems. ISRO has partnered with BHEL for manufacturing space-grade solar panels and satellite batteries.

Mishra Dhatu Nigam

The company manufactures critical materials such as cobalt- and nickel-base alloys and special steel for various components. Mishra Dhatu Nigam is a leading manufacturer of speciality steel, super alloys and titanium alloys catering to niche end-user segments like space, defence, etc. Within the overall steel market, the company’s area of focus is speciality steel.

Walchandnagar Industries

The company manufactured critical boosters used in the Chandrayaan-3 launch vehicle. So far, it has supplied components for all 48 launches by ISRO. Walchandnagar Industries has planned a capital expenditure of Rs 60-100 crore in the next 12-18 months. The company has actively participated in making booster motor casings and nozzles for ISRO.

Taneja Aerospace

The company built important structural assemblies for HAL, and is a supplier of components to ISRO for its booster rockets. It has been engaged in the manufacture of general aviation or non-military aircraft and has three business divisions: aircraft sales and services, aero structures and airfield services and MRO or maintenance, repair and overhaul services for aircraft. The company is a supplier of aero structures to government organisations like HAL and NAL in new aircraft development programmes.

Electrosteel Castings

The company supplied ductile iron pipes to the Satish Dhawan Space Centre, Sriharikota, which is a spindle-shaped island off the east coast of Andhra Pradesh and is the country’s only spaceport. Apart from ductile iron pipes, the company’s product portfolio includes ductile iron fittings, ductile iron flange pipes and restrained joint pipes.