BEL, BEML, Pipavav rally 5-8% on Rs 80000 cr defence push

Shares of defence stocks are celebrating even after Diwali as the sector has bagged major government aid. Stocks like BEL, BEML and Pipavav Defence rallied 5-8 percent intraday on Monday as the government approved projects worth a whopping Rs 80,000 crore. The government also decided that six submarines will be made indigenously and over 8,000 Israeli anti-tank guided missiles and 12 upgraded Dornier surveillance aircraft will be purchased.

The decisions were taken following a meeting of the Defence Acquisition Council (DAC), chaired by defence minister Arun Jaitley, that lasted for over two hours with defence secretary, the chiefs of all three services, defence research & development organisation (DRDO) chief and other senior officials attending it. The bulk of the decisions went in favour of the Navy that was in dire need of up-gradation and capability enhancement.

The big ticket step was the decision to build six submarines in India at a cost of about Rs.50,000 crore rather than source it from outside. The other major decision was to purchase 8,356 anti tank guided missile of Israel worth Rs.3,200 crore rather than the US’s Javelin missile for the Indian Army. The Army will also purchase 321 launchers for the missile. Another 12 Dornier surveillance aircraft with enhanced sensors will also be bought from the Hindustan Aeronautics Ltd (HAL) at a cost of Rs.1,850 crore.

The DAC also decided to buy 362 infantry fighting vehicle from the Ordinance Factory Board, Medak in West Bengal for Rs.662 crore. Giving details of the decision to make the six submarines in the country, official sources said a committee will now be formed by the defence ministry which will study both public and private shipyards over the next 6-8 weeks. Following this, the ministry will issue Request for Proposal (RFP) to specific port that will be identified on the basis of the study which will look into whether they have the capacity and manpower to build six submarines in the same port only besides other parametres.

The submarines will be Air Independent Propulsion (AIP) capable that will enable them to stay underwater for longer than a conventional submarine besides having enhanced stealth features. The Navy currently has 13 operational submarines and the target set in 1999 was to have 24 by 2030. The previous United Progressive Alliance (UPA) government had gone in for six Scorpene submarines and the first is likely to be delivered only in 2016. The decision to manufacture the submarines in India is in line with Prime Minister Narendra Modi’s “Make in India” pitch.

At 12:45 hrs, Pipavav Defence and Offshore Engineering Company was locked at 5 percent upper circuit at Rs 43.05, up Rs 2.05 on the BSE. Bharat Electronics was quoting at Rs 2,141.20, up Rs 83.90, or 4.08 percent on the BSE. Walchandnagar Industries is also locked at 10 percent upper circuit at Rs 119.50.